By: Jay Long
Q: Dear Jay, I’m in the process of renovating my fifth house. I’m keeping all the houses for long term rentals. They are in great areas and I bought them at huge discounts because of the horrible condition they were in. I need help on what quality of stuff to put in the houses for the renovation. Do I buy the super cheap $800 furnace or the best name brand $3,500 one? Same question on all of the other major expenses for the houses. Price Conscience but not Cheap in Cleveland A: Dear Price Conscience, Great question! If you’ve done five houses, then by now you’ve learned that contractor prices can vary by double and triple of what you expected. I’ve renovated almost 200 houses, some to be resold and some to be kept as long term rentals, just like you are doing. I made a lot of decisions in the beginning that cost me more money up front that I thought would payoff in the long run, only to be disappointed months to a couple of years later. Do you go cheap? Do you go high-end? How do you find that mystical balance of the best value for the money? First let me say, I have never lost money by going cheap on materials. Cheap lower quality materials, fixtures and mechanical units always cost you less money to get the job done. But, they will also cost you some headaches and frustration in the future when you have to redo the jobs only a few years later. There is nothing wrong with being a tightwad. It’s a simple tradeoff, less money for more problems. Depends on what you want more. In the very beginning cheap was ok with me, but as I got more houses and tenants to deal with, I wanted to have fewer headaches. And having to redo several of my cheap jobs got old fast. So I went to the other end of the spectrum and started using all high quality expensive materials and fixtures. This created another problem. I had less cash flow because more money was spent on renovating each house. I also noticed I was replacing several high-end furnaces and air conditioners after six or seven years. That was because the tenants never changed the air filters and they let their dogs chew and pee on the air units outside and the heating units in the basement. Now I’ve come back to some sort of middle ground with good stuff for some items and cheap stuff for others. Having been on both sides of this fence, here’s what my conclusion is for quality of materials on the most common repair and updates. • Use cheap carpet and cheap paint. No matter how good the stuff is it only lasts the life of one tenant. • Use cheap furnaces and central air units. They will never last their full life span because they are not taken care of by the tenants. • Buy good quality roofing materials that will last as long as possible. Most tenants won’t hurt your roof. Except satellites dishes or bullets. • Buy good quality water heaters. They last longer and don’t really cost that much more. Plus they heat the water faster for longer showers. • Use the old windows as long as possible. Windows will always have something broken. It’s cheaper to fix the old ones. • Use medium quality plumbing fixtures in the kitchen and bath. This is a couple of notches above the cheap stuff. Get the stuff that’s durable but not expensive and fancy. I’m sure there are thousands of little tips that your fix-it guys could give us as well. The general philosophy I follow is to use good stuff on items that the tenants normally don’t break; and to use the cheap stuff on everything that is going to get destroyed anyway. Jay Long is an expert real estate investor and national speaker. He’s also a licensed real estate broker, author of several real estate courses, seminars and a monthly newsletter, and former vice-president of KREIA (Kentuckiana Real Estate Investors Association). If you would like more information about Jay’s courses, monthly newsletter subscriptions, or if you would like to have Jay speak to you group… contact him at: JAY LONG PO BOX 20025 LOUISVILLE, KY 40250 PHONE (502-893-3313) FAX (502-893-3384) EMAIL Jaylong7@aol.com or www.JayLongInnerCircle.com
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