We have designed a framework at JakeandGino.com which entails three crucial steps:
- Buy right
- Manage right
- Finance right.
To be a successful real estate investor, you have to follow these 3 steps and execute them. Investing in rental properties to us is analogous to using a wheelbarrow. A wheelbarrow has 2 legs and a wheel. Each leg represents the steps to buy right and to finance right; these 2 steps are fixed. Once you have achieved these two steps, your job is done in these areas. The wheel represents manage right because managing a property is always constantly in motion. If there is a weakness in any part of the wheelbarrow (your investment), then the wheelbarrow will fall over and your investment will fail. Hence, the name “Wheelbarrow Profits” for our framework.
Let’s tackle the ‘manage right’ portion of the framework in this article. Improving a property doesn’t always involve major changes and a huge expense. Sometimes, it’s the combination of smaller fixes that can really pull a property together.
These changes will be classified as either an improvement or a repair, and while both make the property more appealing to tenants, repairs typically aren’t very expensive and are tax deductible for the year in which they’re made, while improvements are more costly and are depreciated over the course of several years. Repairs, such as a leaky faucet or a broken doorknob, keep conditions livable but don’t add much in terms of value to the property, but improvements, such as replacing a roof and replacing the electrical wiring, do add value.
When it comes to what we fix on the property, we always start from the outside and work our way in for the pure fact that the outer appearance is what potential tenants see first. If their impression is negative, they’re not even going to make it through the front door. Change the perception of the property, and you increase the interest of potential tenants.
Also read to enhance your know-how on investing in rental properties: Investment Realty – Property Classification
Once the outside is taken care of, we tackle the inside. We start by working on any vacant units that need to be “turned” as it’s vital to get these units up and running to generate revenue. To start, these units need to be painted, carpeting and flooring should be replaced if it’s old, worn, or damaged, all unattractive light fixtures need to be replaced, and all plumbing must be in working order.
The heart of the home is the kitchen, and it’s where we focus much of our effort. We replace countertops, change out sinks and faucets if need be, and update appliances if they’re old and not working properly. Rather than replace entire cabinets, we try to repaint or reface them if possible.
Onto the common areas, which include the basement, hallways and laundry room. We install fluorescent lighting to reduce the electrical expense, and install photocells outside to control electricity usage.
Below is a list of the 3 top items that we fix in order to make the property more appealing, retain quality tenants and drive our investing in rental properties towards success. Keep in mind while reading the below information that you only have one chance to make a great first impression, so any changes that can be done are extremely beneficial.
They’re usually one of the first things potential tenants notice when they pull up to the property, so ones that are damaged or rusty aren’t going to be a very good sign. We suggest replacing all the mailboxes to maintain uniformity. They cost around $25 per mailbox, but can be priceless in terms of making a positive impression.
Trimming the trees and shrubs, mowing the lawn, and trimming the weeds can not only revitalize the property and make it more attractive, but it can also let more natural light into the units. We also install inexpensive shrubs around the property and water the lawn so the exterior looks clean and vibrant without costing a fortune. Investing in rental properties is after all more of smart investing.
The last thing you want is a potential tenant pulling up and being greeted by an overflowing garbage dumpster that not only looks unattractive, but also smells. It’s certainly not a positive impression. Our solution is to put fencing around it so it’s out of sight yet easily accessible. We match the color of the fence to the exterior of the buildings to give the property a uniform look.
In our next article, we will discuss the next 3 items that we fix on our rental properties to add value and retain quality tenants.
Follow our framework to success in multifamily real estate investing. Leave us a comment down below and let us know what you focus on when repositioning a rental property!