Is it more cost effective to have PMs rehab a property or to do it myself? (agents, Realtor)
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By "do it myself" I mean finding individual contractors and repairmen for the various things that need fixing. I have a SFH that needs new flooring and several minor repairs such as hardware, broken tile, etc. I'll hire a PM anyway to oversee the renting and am wondering if I should have them fix it up, too. If I end up paying a PM 1-2k more than what it would've been to have done it myself I'd prefer to save myself the hassle. I have no connections and would be starting from square one using resources such as Yelp to handymen.
Do PMs generally fix up places for less or more than it would take an individual to do so? On the one hand, I assume they have conenctions with contractors, but on the other hand, I'm sure that they want to be compensated for their time and so perhaps charge a markup?
Also, I want to sell the property in two years (do a 1030 exchange ASAP) so the place needs to be fixed up in a way that would increase its value for selling.
By "do it myself" I mean finding individual contractors and repairmen for the various things that need fixing. I have a SFH that needs new flooring and several minor repairs such as hardware, broken tile, etc. I'll hire a PM anyway to oversee the renting and am wondering if I should have them fix it up, too. If I end up paying a PM 1-2k more than what it would've been to have done it myself I'd prefer to save myself the hassle. I have no connections and would be starting from square one using resources such as Yelp to handymen.
Do PMs generally fix up places for less or more than it would take an individual to do so? On the one hand, I assume they have conenctions with contractors, but on the other hand, I'm sure that they want to be compensated for their time and so perhaps charge a markup?
Also, I want to sell the property in two years (do a 1030 exchange ASAP) so the place needs to be fixed up in a way that would increase its value for selling.
You might do all right with a property manager. They should have good contacts.
Cautionary point: Be clear on the quality you want. Some PM's have a rolodex full of the cheapest grifter tradespeople around, because some property owners only want the cheapest of the cheap with quality a secondary consideration.
Thanks, all. I am planning on selling the house in a year via a 1031 exchange so quality is important. I was thinking of perhaps having some real estate agents look at the house and get recommendations from contractors from them. Would this be a good route?
Depends on how much of a rehab it needs. You might be just as well off selling it now as-is and 1031 now instead of dropping tens of thousands on a rehab. Depending on the flooring and other items you are looking at $7k-$20k to get it rentable then you pay a PM 1 months rent plus whatever they charge monthly to carry a tenant just to get rid of it, doesn't make sense to me. Sell it now and your realtor can help coordinate any repairs the buyer requests or you can discount it and let the buyer figure it out after close.
Sounds like this isn't much more than a basic "make-ready" job. Why would you expect a property manager to charge an additional $1-2k on something so seemingly simple? As Mike said, most of us PM's have these respective vendors at our ready, and can get these jobs done in short order with very little effort on our part. I don't speak for all PM's, but I don't currently upcharge for make-ready work.
Now, it sounds like you're trying to do two, possibly conflicting, different things here. You want to rent this property for a year or two, but also want to add value with your upgrades. I'd caution you to be careful how much "value" you want to add before putting a renter in the property. Any area of the property you plan to upgrade should be something that's not subject to inordinate wear-and-tear. For example, if you're installing carpet, don't overdo it. Keep it simple, so that if the tenant is less than clean during their 1-2 year tenancy, you didn't waste a few thousand dollars on that premium carpet. Just get some decent rental grade stuff.
Depends on how much of a rehab it needs. You might be just as well off selling it now as-is and 1031 now instead of dropping tens of thousands on a rehab. Depending on the flooring and other items you are looking at $7k-$20k to get it rentable then you pay a PM 1 months rent plus whatever they charge monthly to carry a tenant just to get rid of it, doesn't make sense to me. Sell it now and your realtor can help coordinate any repairs the buyer requests or you can discount it and let the buyer figure it out after close.
Quote:
Originally Posted by EricBoyd
Sounds like this isn't much more than a basic "make-ready" job. Why would you expect a property manager to charge an additional $1-2k on something so seemingly simple? As Mike said, most of us PM's have these respective vendors at our ready, and can get these jobs done in short order with very little effort on our part. I don't speak for all PM's, but I don't currently upcharge for make-ready work.
Now, it sounds like you're trying to do two, possibly conflicting, different things here. You want to rent this property for a year or two, but also want to add value with your upgrades. I'd caution you to be careful how much "value" you want to add before putting a renter in the property. Any area of the property you plan to upgrade should be something that's not subject to inordinate wear-and-tear. For example, if you're installing carpet, don't overdo it. Keep it simple, so that if the tenant is less than clean during their 1-2 year tenancy, you didn't waste a few thousand dollars on that premium carpet. Just get some decent rental grade stuff.
Thank you both. I have to convert it to a rental to a year before doing the 1031 so that it will qualify as a "rental property." It's a slightly complicated situation but the property was gifted to me from a family member which is why I don't want to sell it now (huge capital gains), but I also don't want to rent it out indefinitely because I think the equity could be converted to a property with a better ROR.
So, yes, EB, I am trying to fix it up both for renting and selling. I was even thinking of putting in hardwood floors. I know that is risky but I figure that I could emphasize to my PM to find an exceptional tenant for a year and cross my fingers things don't get too messed up. I guess I could also do carpeting though this may not add to the value of the home when it comes time to sell.
I have laminate floors in my rental because it's easier to clean and I don't fret about pet stains, carpet cleaning, etc. I have a pm, but I handle all the reapairs with my own handyman who was referred from a neighbor on Nextdoor.com.
If your estimatiate of $1k-2k is correct, I would hire a handyman.
I would have a PM handle some light repair to make the home "rent-ready"...not putting too much in upfront. Convenient to clean flooring like tile or wood...too much else this early on will only result in large repair costs when you go to sell. Save that money for when you are ready to sell and make those improvements after the house is ready. Good luck! What an exciting adventure!
By "do it myself" I mean finding individual contractors and repairmen for the various things that need fixing. I have a SFH that needs new flooring and several minor repairs such as hardware, broken tile, etc. I'll hire a PM anyway to oversee the renting and am wondering if I should have them fix it up, too. If I end up paying a PM 1-2k more than what it would've been to have done it myself I'd prefer to save myself the hassle. I have no connections and would be starting from square one using resources such as Yelp to handymen.
Do PMs generally fix up places for less or more than it would take an individual to do so? On the one hand, I assume they have conenctions with contractors, but on the other hand, I'm sure that they want to be compensated for their time and so perhaps charge a markup?
Also, I want to sell the property in two years (do a 1030 exchange ASAP) so the place needs to be fixed up in a way that would increase its value for selling.
A fluff and buff is not hard. You can call around get some bids and call a handyman. BUT A good PM should be able to handle it for a very basic charge and they have connections who can do it cheaper. If they want your business they round be smart and just take care if it. They will make their money on the contract. And it shows goodwill. If you were to do a full remodel and I'm talking real remodel, I would say get a advisor or a contractor can kill you in change or additional work orders.
One thing to remember in construction. If it's not on paper it didn't happen. Having a knowledgeable consultant or PM actually can save you money in the long run.
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