DIY Projects You Can Do in Your Rentals

If you are an active real estate investor, it is likely you have rental properties.

When getting your rental properties to cash flow, you need to save money whenever you can. If you are just starting out, it is possible to do quite a few things yourself to save on your maintenance costs. Below are some of the things we see real estate investors self perform:

Drywall Patches Between Tenants

Painting

(while certainly not a fun gig, if you have the patience, it can save you quite a bit of money)

Mini Bathroom Remodels

If you’re looking at ways that you could possibly look to increase rental rates, consider some upgrades. A little can go a long way to what a renter is seeing.

Carpet Cleaning

Renting a carpet cleaning machine from a local vacuum store or big box like Home Depot or Loewe’s.

Minor Landscaping

Curb Appeal like adding mulch can make your rental property more desirable to tenants

Replacing Light Fixtures

We hope that these ideas get your mind working to see how you could possibly save money by self performing some improvements to your rental properties between renters.

what is an accredited investor?

As you are getting started real estate investing, you might be seeing offerings for passive investment.

Some of these investment offerings require their investors be accredited. So what does that mean?

The full requirements are linked here:

Electronic Code of Federal Regulations

For an individual to be considered an accredited investor:

  • their net worth (not counting their primary residence) is $1,000,000 + OR

  • they make $200,000/year in gross income in the past 2 years OR

  • they make $300,000/year in gross income filing jointly with a spouse in the past 2 years

These rules exist to help protect investors who could be “duped” by investment offerings, hoping that investing in these types of offerings wouldn’t be catastrophic for the average individual.

It is still very possible to invest in real estate without being accredited, but certain offerings are only available to those individuals.

Do I Need to Become a Real Estate Agent to Invest?

At TABS, we meet many new investors who frequently have questions about how to get started in real estate investing. A frequent question we receive is “Should I become a Real Estate Agent?”

Our Answer….it depends (I bet you didn’t see that coming)

Here are some pros

  • automatic access to MLS

  • access to view properties without scheduling with a real estate agent

  • saving on paying commissions to a real estate agent

With that, there are some cons

  • In Colorado, you are required to “hang” your license under someone for a period of 2 years. That company will likely have requirements that they be paid sometimes a monthly fee in addition to a cut of all sales. They will probably also have sales requirements.

  • You’re new. So you would be learning two new trades rather than relying on the expertise of an experienced real estate agent. An experienced agent can help you navigate a decent deal, can offer up suggestions on what repairs buyers are looking for, can appropriately help price a home. They also have contract and negotiating experience that could be of help.

  • There is more potential for liability with a license. A license requires insurance, which can create a target if someone is looking to sue

We hope this helps you make your decision.

Case Study - Riverwood New Construction

New Construction in Riverwood Neighborhood of Breckenridge, CO

Finished Home

Finished Home

Vacant Lot with Trees and Boulders

Vacant Lot with Trees and Boulders

Basic Info

  • Purchase Price Land $487000 in October 2017

  • Sold Newly Constructed Home for $2,995,000 in January 2019

Market Value of Property

Case Study - Welby Fix n Flip

After

After

This property was purchased at the end of June 2018 for $195k by an experienced flipper. This borrower requested a hard money loan amount of $180k. Rehab for the property was $35k. The flip took 4 months.

Basics

  • Source - Referral to Borrower

  • Status - Estate

  • Condition - Poor / Hoarder Home / Arson Property - see below before picture

full gut - during construction photo

full gut - during construction photo

Obstacles

  • Title took a good deal of time to close because several deceased persons were on title. All parties of the transaction had to be patient to await clean title from seller’s representatives.

  • Gas and Electric had been off at the home for a significant amount of time that Xcel required the borrower to obtain new service as if the home was newly constructed. This line item was over budget as that was unforeseen for the borrower.

before

before

condition at time of purchase - hoarder home

condition at time of purchase - hoarder home

Home Value

IT'S OUR BIRTHDAY!

how do you keep your tenants happy?

Goal: Keep Long Term Tenants Who Pay Their Rent

tenant washer / dryer

tenant washer / dryer

To accomplish this goal, keep them happy. Here are some ways to consider doing that:

  1. Make it easy to pay rent. There are online services that allow renters to pay through a web portal - often this will add the fee to the renter’s side of the transaction. Here are some options, but there are many out there for you to look into:

    Pay Your Rent.com

    Rentler

    RentGroove

  2. Consider allowing a reasonable amount of pets - especially in Colorado where many folks own dogs or cats. It is a very important component for them choosing a place to live.

  3. If possible, add bathrooms. Renters will prefer a place with a bathroom per room rather than shared.

  4. COMMUNICATION - Most problems stem from poor communication. If you’re trying to set someone up for a repair for instance, communicate the timeline so that they aren’t left wondering.

  5. Consider offing a renewal incentive, if you have a good tenant you would like to keep. Good tenants are worth their weight in gold.

  6. Let tenants know kinks about the property and how things work. Hopefully this will lead to fewer calls later about where to shut off water or power etc. Let them know how to look up if there is a power outage in their area rather than something wrong with the home. You would be surprised, but people aren’t always familiar with how to check.

  7. Do not over-inspect the property. Give tenants pace and provide them notice if you need to come by.

  8. If you raise the rent on a tenant who stays, consider making an improvement at the same time as an incentive.

  9. If possible, don’t get the cheapest appliances - they won’t last as long. Consider getting a warranty should repairs be necessary.

how to secure vacant properties

Keep Your Investment Safe

Investment Property with Security Door

Investment Property with Security Door

  • Maintain proper insurance - vacant property policy

  • Cover street viewable windows - there are inexpensive options if you do not want to install permanent coverings

  • Alternate lights left on - can be done physically or devices set up

  • Lock Gates

  • Make sure all doors lock. Add piece of wood to sliding glass doors

  • Keep construction supplies & equipment out of view

  • Post beware of dog sign

  • If vacant during winter, winterize the home to avoid potential damage

  • Perform regular maintenance

  • Post sign for a security company even if there isn’t an existing alarm

Hold It or Fold It - Getting Started with Rental Property Evaluation

If you are new to real estate investing, there are some things to consider when buying an investment property.

First - Consider the location of the property. Is the property in a desirable part of town? Is it an area with with many tenant opportunities? Is it near public transportation? The area will also determine what the property can rent for. Be sure to look at what neighboring properties are renting for and note their condition.

Property Due Diligence -

Repairs : what repairs will you need to make in order to make the property rentable? If you are used to flipping, there are different repairs that will be necessary if you are now planning on renting. Such as being able to get away with not including some appliances when flipping, but needing to provide those to make tenants choose your property over others available. What repairs are necessary for health and safety of your tenants and to limit your liability as the owner?

Holding Costs : what will insurance, taxes, vacancy, utilities, etc cost you over time? What will you need to reserve for any repairs?

Financing : what financing are you able to get? how much will you be required to put down? and after all of that, will the property cash flow. Not only will you want your investment to cash flow, but your lender will feel more comfortable providing financing to you if your investment “pays for itself”. Hopefully in addition to the monthly cash flow, your property will appreciate over time. This will allow you to sell for a profit on top of it generating monthly cash flow to you over time.

You will hear us preach this time and time again. But money is made on the buy. Make sure you do not get excited about a seller, wholesaler or agent’s sexy numbers of what you can rent a property for. Be sure you do not overpay for the property.

Be a good landlord - if you can keep tenants in the property for long periods of time rather than needing to get new tenants constantly, it will make your life and your wallet better.

TABS provides financing to landlords in Colorado. And our management team has been a landlord - we are happy to counsel you if you are just getting started.

Good luck!

Homeowners Associations

first - what is a home owners association? a real estate developer will generally set up a home owners association in a master planned community. this association will determine rules or covenants for the people who live there, generally to keep the look of a community consistent and to make sure that everyone keeps up the neighborhood - removing trees that are dead, not keeping a recreational vehicle parked for an extended amount of time or changing the paint color unless approved. the HOA will also collect assessments from the home owners in order to maintain common areas. The developer will generally be a member of the HOA until an agreed upon number of homes are sold. A recent development in Colorado is that an association must be managed by someone or an entity with a CAM (community association manager) license. This is generally necessary because the management of the HOA handles funds from sometimes a sizeable amount of people and those need to be properly accounted for and disbursed to protect the owners who live within the community. 

another consideration in properties with home owners associations, is whether or not a traditional lender can provide financing. there are instances, such as the case, with non-warrantable condos where a portfolio or alternative financer would be required. a non-warrantable condo could exist for example if there are more owners within a community who do not occupy their property as their primary residence than people who do. this information is provided by the homeowners association. some banks find these loans riskier than a community that is a majority owner occupied. if you do find aproperty within one of these subdivisions, also consider your exit strategy. will your end buyer be able to get financing? or does this limit your pool of buyers?

real estate investing is all about whether or not a deal makes financial sense, unlike your primary residence where there is an emotional element: a desire to be in a certain neighborhood, near a certain school, a property with blue shutters, whatever the case may be. homeowners association dues can be pricey, especially in communities with extra amenities such as clubhouses, pools, fitness centers or golf courses. homeowners dues could rise. these liens also take a superior position to any loan should you not pay them which would be of great concern to your lender. when evaluating a property, it is always wise to think of multiple exit strategies. should this house not flip, what do i do? if the market changes, how do i deal with this property? think of these items: will you be able to rent out the property if needed?  would i be able to re-finance my hard money loan? 

we are here to help and call attention to these issues as they are discovered. not only do we have experience as being a hard money lender to colorado investors buying properties with home owners associations, but we have developed projects and set up these homeowners assocations, been directors of their boards of directors. if you ever have any questions, we are here to help!