I receive calls weekly from real estate investors seeking investment property advice about property rehab costs and property management service selection criteria. A recent interaction with a property owner provide allows me to share my experiences on the thought process required to benefit from real estate investment. The below examples demonstrate the consequences of deferred maintenance and the CHEAPEST solution–damn the consequences. The examples are short-term rentals, but translates to all investment properties. Being cheap will cost you more money over time, fix a problem once with quality materials and service providers. The examples also facilitate evaluation criteria when considering property managers. BOTTOM LINE UP FRONT: Cost only evaluations wastes more time and up to triple the original solution .
Military First BnB Solutions leverages best practices through a long-term real estate investor’s mind set including insurance/bonding, trade licenses, vendors that clean their work areas after the completion of work, and most importantly schedules that work with short-term rental reservations. Our vendors are not the cheapest because they select quality materials that eliminate repeat repairs and prevent a property inspector flagging non-code compliant repair work. The objective attempts to prevent the enormous cost of removing non-code compliance repairs and rendering work to comply with current legal code requirements during a future sales transaction. Lastly, we decide on products based on quality and price and recommend that property owners consider both attributes. The lowest bids are LOW for a reason and result in additional expenditures in the future
Here are a few property examples, including my own blunders over 20 years of real estate investment, that you should consider and not repeat.
1. A house required to be painted twice in a year because improperly prepared surfaces and incorrect paint selection pealed all over the floors. The cheapest vendor forced an owner to absorb the cost of a second painting, generated less than 5 star comments from guests, and costs critical time/money.
2. Hot water heaters installed without a drip pan in a house with a crawl space and a drain line not routed outside of the house–both code violations. If the hot water heater were to leak, the damage to the floor, sub-floor, and floor joist will costs thousands of dollars, decrease the available nights available for guests, and generate a flag during a home inspection during a future sales transaction. All of these things could require $5-10K of additional repairs, lost revenue and reduced sales price when an additional $200 in materials and labor would negate these enormous costs, time, stress, and risks.
3. Cheap appliances are CHEAP for a reason. They will require repairs repeatedly, costing both time and money. These appliances slow down the turnover process with low heat dryers and inefficient washers. I personally purchased a used washer and had to purchase a new washer less than 3 months later. Don’t repeat my mistakes, purchase quality one time.
4. Cheap and low quality furniture break easily and require replacement, resulting in DOUBLE or TRIPLE initial costs. A simple solution leverages quality and only increases total purchase price 30%–ONE time.
5. Delayed maintenance resulting in additional damage beyond the original problems. A hot water heater or kitchen appliance beyond 15 years of age that should have been replaced, breaks on a holiday, costing TRIPLE replacement costs because of emergency service and very slow supply chain availability.
6. A portion of a roof with only tar paper instead of shingles that damages the property pointed out repeatedly to the owner with acknowledgement, but no action to remediate well beyond six months because it costs too much money for shingles. In reality, this generated over $1000 in additional repair costs and uncounted lost rental income to placate guests so that they don’t ask for a full refund for their entire stay and leave 1 star reviews.
7. 20+ year old toilets that leak and generate $80/month of additional water use in a home for over a year despite the recommendation of toilet replacement during the preparation of the house for short-term rentals.
8. Electrical wiring that continues to accrue repairs over a year’s time because a non-licensed repair person was utilized multiple times to keep costs low instead of a licensed electrician.
If you evaluate your real estate investment decisions STRICTLY on initial repair costs alone, your total future costs will be outlandish and your profits will be significantly lower than your projections. Today’s decisions will adversely impact your exit plan through a lower sales prices, increased repair concessions, and extended days on the MLS.
Military First BnB Solutions can help you properly evaluate potential properties, increase your monthly revenue, and position your property for an effective exit strategy. Contact us to reduce stress and earn more, https://www.militaryfirstbnbsolutions.com/