Epic Real Estate Investing - The Most "Rehab Bang" for Your Buck | HTH 010 | 498

Episode Date: October 17, 2018

Maximize your rental price and minimize your vacancies with a rehab bang! Learn why you should pay attention to detailed house cleaning, why you should re-paint the walls in order to get the finest tenant, and how to tighten up an entryway to get the best first impression. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Don't wait for appreciation to buy real estate. Buy for cash flow and wait. In other words, Hold That House. Your host's Matt Andrews and Matt Terrio. Yeah. Hello.

Flipping houses can make you rich. Holding them will make you wealthy. And that's why we're here. This is the Hold That House show. I am Matt Terrio. And over there is Mr. Matt. Andrews. Boo-ya.

And before we begin, we've got a free gift for you. Go to Hold Thathouse.com and download the four-hour work month. It's the Ten Commandments to Managing Property Managers, which is really, after my years of experience, Matt Andrews' years of experience, have just kind of, you know, identified that as the key ingredient to financial independence through real estate that no one's talking about. And you can get that for free. The key ingredient to your independence, you can get that for free at Hold Thathouse.com. And free is a deal when you consider how much we spent to learn those things, right?

This is true. We should charge for it. We should. It's really good because we spent blood, sweat, tears, and lots of money learning those 10 things. And so you guys don't have to do that. No. Right there. Awesome.

Awesome. Hold Thathouse.com. All righty. So today we're going to talk a little bit about rehab. Renovations. How much is too much? How little is not enough? And what type of rehabs?

What type of improvements can you make to your? income property to maximize the income of that property. Right. Exactly. And guys, we're not talking about big giant fixes here. I mean, obviously, if your roof is leaking and needs to be replaced, okay, that's a big giant expense. You take care of that. If your HVAC system goes out, you take care of that. What we're really focusing on in this episode is what are those things that you could do maybe in between tenants, right? So if you're managing your properties yourself, somebody's moved out and before you can move somebody in, you've got to do some punch out, right? Or your property manager, if you've hired out, you know, a property manager, you're investing

at a state and getting cash flow that way, you know, what are the things that your property manager can do in between tenants and how do you get the most paying for your buck? Right. So this is the assumption that everything works, everything's up to code, right? Everything is safe. Right. This is making all those assumptions first. Exactly. Now what? Exactly. Okay, good. Exactly. So a lot of this stuff will be, you know, kind of, uh, not, not superficial. That's not the word I'm looking for, but, um, uh, cosmetic. Cosmetic. Right. So, cosmetic kind of thing. So, so let's just break down a list real quick. And some of these guys are going to seem like so simple. They're stupid. But honestly, a lot of landlords, a lot of property managers miss this stuff.

Yes. So, you know, as simple as some of this stuff is. So number one on my list, and as simple as it seems, cleaning. Right. Real cleaning. Okay. It surprises me how many property managers and how many do-it-yourself landlords just think when a tenant moves out, you sweep it out, and maybe you wipe down the countertop and then you roll. You know, and that's just, that's not how it works.

I mean, if you really want that to show well, if you want people to, you want people to, envision themselves living in it, you've got to give them a really good, clean place. And that means cleaning out, you know, the fridge. And that might mean even getting rid of the fridge if, you know, if junk has been left in there too long or cleaning out the, and this is one that a lot of property managers miss, cleaning out the stove. You know, that stuff that gets caked on there. You can't just rub a, you know, a rag over that and clean it. You know, you have to have an oven cleaner that sits there for an hour and, you know, gets all that stuff out. So you've got to get somebody that is a true cleaning crew or, you know, your manager or whoever's managing the property for you,

needs to get in there and get their hands dirt. Equivalent to what we'd call a detail on a car. A detail on a car. Right. Exactly. Got to get the windowsills. You got to get inside and out. Right.

Not just a quick vacuum of the car, you know, for five minutes and leave. Take that screen door out, spray it down, get all the dust and crud off of that. Right. Exactly. It's amazing, too. I mean, it's all, and it's just little things that you barely even think about, but it means so much to a tenant moving in. You know, like a sliding glass door.

You know, I had, you know, this is a. been a few years ago, but when I was really training one of my managers and walking through some of the stuff with them, you know, the sliding glass door, and there's just like, you know, they run on a track, you know, at the bottom, right? And so you open it up and there's just kind of dirt in that track, you know, and you can sweep it a little bit, but really what needs to happen is you've got to get a wet rag in there and you got to get down to those grooves and get the dirt out of the track. Some people might not even notice that. Other people will look at that and say, okay, where's the untapped layer of dirt over this whole house? Because this obviously hasn't

been cleaned, you know? So just those little things. even though it seems so silly, makes such a big difference in the perception of the rent. There is a subconscious effect to it. Absolutely. And some people will turn around and walk away, not even knowing what it was they didn't like. They just didn't get a good feeling from it.

And a dirty place is the easiest way to get someone to turn around and go rent something else, not your property, right? So cleaning, a true deep cleaning, a detail, if you will. The next one is paint. All right? I'm a big fan of throwing another coat of paint on things for a couple different reasons. Number one, it just makes it look super clean. You know, there are sometimes when, you know, we had some apartments or I've had some houses that, you know, when I was managing them myself and kind of going through them and doing the punchouts, I'd say, you know, this is real close.

You know, this is like real close. I could probably just paint this one wall in this room and we'd be okay. It was passable. It probably would have even rented, you know, but for the money it takes, you know, and for the labor, you know, to pay someone to do it, not that much. You know, somebody rolling out a house for a day, you know, something pretty simple. it makes it look super clean it gives it that fresh new paint smell too it's kind of like that new car smell when you get into it's what I was going to say

it's the closest you can come to that new car smell I think yeah it's a fresh smell and it's a lot better you know to walk into a place even if the smell is strong because it was freshly painted it just has this sense of freshness you know this is brand new I'm not you know this tenant is thinking now I'm not moving into this place and touching this wall that a million other people have touched right you know it's this is new this is my right this is my house this is my home Or whatever it is.

And even paint, it might not get you more in rent, but it might get you a few extra applicants so you get to pick the best tenant. Exactly. Or it might cut down the time that you're marketing it. You know, it might be that first person that walks in says, I want this. You know, I looked at three dirty places before this and no fresh paint. And boom, I walked into yours and it smelled good. It looked good.

So that's really, really key. It's just, you know, just some interior paint. You know, even if it's right on the edge, go ahead and do it. You will make it up. Right. And, you know, if it rents a month quicker, you know, You get somebody in there. Then you made up your whole budget on paint right there.

That's a 100% return on your paint. Exactly. 100% return your paint. If it runs a month faster. Absolutely. Absolutely. And a good key for that too is, you know, paint all your stuff the same color. Paint everything the same color.

There's no reason to, if you own 10 properties, there's no reason to customize it. This is my blue house. This is my yellow house. This is my red house. No. Same color. You know, if I were to take you and drive you by the properties that I own in Tampa, you know, and that's where a lot of my free and clear properties and a lot of my

buy and hold properties are, you would think you were looking at the same house over and over again. You know, it's like a light beige house with white trim and usually like a darker colored door. And like there are some neighborhoods where I went two or three in a row. And it's just like, oh my goodness, this looks like the same house. The same builder must have built it. Nope. Same rehabber. That's what it was.

So you used to buy your materials in bulk. You save money that way. And then also cuts down on the decision process. Exactly. Right? You know, Albert Einstein wore the same clothes every single day because he didn't want to to waste any brain power making a decision I want to wear. He looked like he wore the same clothes every day, but he was very smart.

So, so. So don't waste any brain power on that. Steve Jobs did that too. Same turtleneck and same pair of jeans every day. Oh, there you go. He had like 30 pairs of the same turtleneck. He found one he liked.

He just stayed with it, you know. Not saying you all need to dress alike and do all that, but it does make sense on those properties. Same color paint, you know, same type of fixtures. You know, that way as you're replacing things or changing things, it's all consistent. And you have it in stock. You save money on materials. So, super.

Really, really, really, big. The next one, this is a really big one, one of my hot buttons for sure. I know you two map curb appeal. Talk a little bit about curb appeal and how much that means. Yeah, just driving up to the property, whether you have your, you know, your for rent flyers out in the front, or you got your for rent sign with the phone number, or whether the agent is driving by and showing the property or whether the landlord is driving by and showing the property to prospective tenant, or they're meeting there, whatever it may be. That first impression, I mean, I can just think of how many times, even personally as a renter in my past, you know, I was like, oh boy, here we go. Or this

place looks nice. You know, just the initial disposition you walk into the property with can make all the difference in the world. Absolutely. And, you know, and, you know, you think and start thinking about, gosh, my parents come over, they're going to be pleased. They're going to think I'm doing okay or my friends are going to be impressed or, you know, or my friend has a really nice house. So I want to look, kind of hold that same thing, that same stature. Absolutely. And that's most, you know, for most people, it's all they're ever going to see. Like, you know, if someone's moving into a house, the only representation that most people will

ever have with that person is their front lawn, you know, and if that's a mess when they first pull up, it's hard to, sometimes it's hard to even get them in the house if the outside's ugly. And I think about, you know, whenever someone tells you, she's beautiful on the inside. What does that, what does that usually tell you about? Yeah. Let's be honest. Yeah. She's not a looker, right?

a great personality. She has a, she has a fantastic heart. If you look deep on the inside, she's beautiful, or he's a great guy, or whatever it is. That usually means, okay, we're ugly on the outside or whatever. You're making excuses for something else. Exactly. So the same thing goes with houses, you know, it's like you could say, oh, well, wait until you see the tile on the inside. Well, you know what? If the lawn is dirt and, you know, the trees are dead and there's, you know, leaves all over the roof or, you know, or things haven't been mowed in two months, they're not going to see the inside, you know, or even if they go to the inside, they're not going to get past that hurdle of ugly outside, you know, ugly, no curb appeal.

Got it. So that is really, really key. Another one is the entrance. I mean, that kind of goes along with curb appeal, but I like to spend, you know, special attention or give special attention to the entrance to the property. You know, if your lawn looks good and, you know, your door doesn't work right, front door into the house, or, you know, you've got, you know, dirt on the front porch or whatever it is. just uninviting from the front.

Again, that's the entrance to the house. Sure. So you're walking through a portal of ugliness, even if it's pretty inside. Right. You're starting it out the wrong way. You're framing things the wrong way. So I like to do simple stuff. Like I like to put a nice welcome mat down.

You know, my houses are usually all the same color on the outside, usually kind of a, you know, white and brown. You know, so I like to get some color and like a nice mat, not even a nice mat, a $5 mat, you know, from the dollar mark. Put that down there. We even sometimes will put like some kind of deck. record of wreath on the front door, even if the tenant takes it down, that's fine, you know, but it just looks inviting. It looks like someone took the time. You know, if there's a, if there are hooks there on the front porch, put some fake plants on a, you know, and one of those hanging planters. It just looks inviting. Right. It looks, it looks nice. And that makes a big, big difference. New doorknocker. Yeah. Yeah. New doorknocker. Yeah. New doorknocker. Um, you know, if there's nothing worse than walking up to a house and, and their doorbell is all, the little circle around the doorbell is all rusted. and it's kind of hanging off. And the button's yellow.

In the buttons yellow. Yeah, or something. Yeah. Yeah. That's a $5 fix. Yeah. It's a $5 fix. Exactly.

And it looks brand new, right? So why not put a new one on there for the $5 it cost or whatever? So really, really simple stuff. So pay attention, guys, to the curb appeal and especially to that entrance. Please stand by. We've got overhead to pay. We'll be right back. When you go to work for your money, does it return the favor?

If not, no worries. Do not have a money problem. merely have an idea problem. We're turnkey allies.com. And we'd like to share a new idea with you around income real estate that can transform your financial future and accelerate its arrival. Go to turnkeyallies.com and download a free investors package. Turnkeyallies.com.

You do not have a money problem. Merely an idea problem. Turnkeyallies.com. More ideas, less worries. Turnkey allies.com. Now let's move inside to that. Inside the house. What are the two?

and I don't even have to wonder if Matt is going to answer these questions. What are the two most important rooms in the house? Can you whisper that to me again? Kitchen, kitchen and bath. I knew that, but I almost felt like a trick question because it's so obvious. Yeah, the kitchen and my surprise. The kitchen in the bathroom for sure. Yeah, absolutely.

And usually that's because, you know, the kitchen, especially now, that's where everyone congregates, right? And it's also important many times to the woman of the house. If it's a family, it's that kitchen and that bathroom. that's going to sell that rental. Same thing for when you sell the house. You know, if you've got everything else is perfect. Curb appeal is awesome.

Interior paint. The flooring is beautiful. The bedrooms are a great size. Backyard's great. But you have a terrible kitchen with like for Micah countertops from 1982. Okay, they still work as countertops,

you know, and they still pass code. Right, but it's ugly and it's dated. Or you've got pink tile in the bathroom. You know, like I was king early in my, you know,

old tile roll. And even epoxy painting old tile to make it look fresh and white is better than having pink or green tile. So, you know, spend money on those little things, guys. You know, put in a new, maybe not a whole new sink, but put in a new top, you know. In the kitchen, you know, if the cabinets are okay, maybe you can just paint the cabinets and then put on a fresh countertop, something that was made, you know, 2000 or later.

Right. Something that kind of updates it a little bit. Not from the Brady Bunch days. Exactly. And when people walk into a house, it's usually the kitchen and bathrooms that are most outdated, you know. So you might see brand new furniture and this and that, but it's many times it's the kitchen that looks like, wow, that's from the Brady Bunch, you know. It was funny. I didn't know they make would like that anymore.

Mercedes and I took it, take a tour of Elvis Presley's house in Memphis. Graceland. Yeah, we went through Graceland. And I was really expecting a little bit more Liberacee type, but it was very Brady Bunch. Yeah. It was the Shag carpet. It was the formica dinette. It was the, you know, it was...

That was big stuff back then. Yeah, that was big stuff back then. The pool room, where the pool table was, that was a pretty cool room. It had the upholstered red velvet on the walls and stuff. Very Brady Bunch. Very Brady Bunch. Almost like, you know, very 18th century or something. It was very unimpressive.

But anyway. Small rooms, too, kind of strange. You know, it's kind of small rooms in Graysland. Yeah. Cool place, for sure. You didn't see Elvis when you were there. Did you? Did I see all of this?

No, you didn't see Elvis when you were there. Oh, no, I did not. They didn't. They didn't allow us up to the bedroom, which is probably where he was hanging out. Apparently, sometimes he still hangs out there, eats peanut butter banana sandwiches. But anyway, so kitchen and bathroom. The kind of upgrades, like we said, maybe it's just a new kitchen faucet. You know, maybe it's taking that old thing out and putting some, you know, like a brush nickel faucet in there.

Maybe it's doing the same thing in the bathroom. Maybe it's switching out the shower head, you know. You might have a shower head that's perfect. The water comes out great, but you can tell it's from 1982. Guys, that stuff is not expensive. You know, that stuff at Home Depot, you can get really nice looking, stuff, stuff that has high perceived value for 20, 30 bucks in some case. For sure.

You know, so why wouldn't you do that, you know, in between tenants to just upgrade that a little bit? You'll certainly make it back in, you know, the less time that it takes to rent it, or maybe even more money, you know, for the rental itself. The opportunities. For sure. The opportunities are the tenants. Yep.

And so another thing like that, too, very simple and really cheap fans. You know, if you've got just an old white fan. Sealing fans, you're speaking of, yes. Sealing fans. Yeah, with like an old ruffer. rusty chain that you're pulling to turn on the fan and turn it on off. Guys, you know, a Hampton Bay, awesome looking fan is like 50 bucks with a remote control and the whole deal, you know, I mean, and they look beautiful, you know, and you can get the, you know,

black blades or the brown, you know, whatever you want, but it's really simple, you know, and a good handyman can throw that up in a few minutes, literally, you know, so switching something like that out just makes it feel so much more new. So fans is a big one, too. Baseboards, you know, if you've got old, you know, I see in a lot of, you know, I see in a lot houses we buy they got that old like a three step it's like a you know maybe three or four inches tall but they don't make it anymore and it looks like it's got like four different ridges on it you know and when i see that again brady bunch right right and i don't know if you guys are priced out baseboard lately i mean unless you're outfitting a 5 000 square foot house it doesn't

cost very much to put new baseboards in you know so what i've done in a few um even some of my lower-in rentals i put in that nice 5-inch you know baseboard in there you know and it's not that expensive. It costs me, you know, a little bit more than regular baseboard, but when people walk in and they see that, it's got a different feel for sure. It feels elegant. Yep. You know, I mean, I even have a friend who does, and this is going maybe a little overboard, but he even does some like, it's not actually crown molding, but he does like baseboards on the ceilings because it just gives

this look of, wow, this is like almost luxury. Even though I'm renting this house for $800, I'm getting, you know, kind of a feeling of luxury here. So, simple things, baseboards. For sure. Really, really, really simple. Then another thing I like to do, super simple. brand new switches and plates, you know, brand new outlets and outlet covers. Okay, cost almost nothing to go through and have your handyman. PENies. Replice them all, okay, but nothing looks worse than a freshly painted wall.

You know, maybe you're painting it, you know, slightly off white or brown or something like that. And the, what's supposed to be a white plate cover or a switch or whatever is like yellow. Right. You know, it's as yellow as this yellow pad I'm looking at right now. It's just disgusting, right? It looks like a smoker live there for 50 years. And don't paint over the light switches either. Oh, yeah.

That's the worst. Hey, it's all uniform. It's all the same color. That's right. You know, and you got the paint crud stuck in between the sockets and you're just like, don't do that. Yeah. That's terrible.

Guys, that's a big no-no. I'd almost rather have the yellowed smoker, you know, covers than that. But it's so inexpensive to do that. You know, why not replace those? And why not do it, you know, in between tenants when it's a good time to do it, you know? And, again, it just gives the perception along with the paint and some of these other things of, oh, this is. a freshly renovated house.

Right. And when really you spent $500 on the whole thing or something or even a couple hundred dollars. Right. You know, so again, it's little things that make a big, big difference. And just keep in mind, these are renovations for a particular type of house. Your investment property. Because your investment property is to produce money. It is to produce a profit.

Now, these are little things that can go a really long way to maximize that profit or minimize the time you're looking for a tenant and in between tenants. But here's something that we do in all of our markets for our tenants, how we really maximize our dollar. Because you can go overboard on some of this stuff. You can overpay

where you're getting, you know, you've hit at that point of diminishing returns. Right. So this is what we do. We go through, we make sure we have this rent-ready definition. And that's used pretty loosely in our industry. And typically it means to do as little as possible. Right.

Right. Our rent-ready definition means make sure everything works, make sure everything's safe, make sure everything's clean, and make sure everything's up to code. That's our first level of renovation. Then, to maximize the income potential of the property, what we do, because every market's different, we're in 10 of them, and they're all very different markets, is that we will go and we will preview other properties in the area that are vacant and for rent the same time that ours is. That's awesome. Yep. And we'll look at what our competition looks like. So we make sure that we are just a couple notches above our competition.

Because we know when someone goes out looking for a property or looking for a rental unit, they don't just look at one. They look at multiple ones and choose the one that they like the best. So what this does in many of our markets, it prevents us from overspending because we see what we don't have to do. Right. Because we could do the bare minimizers went through, and we could be heads and shoulders above all of our competition. And in other instances, we're like, okay, well, maybe we should put a different type of tile in the kitchen. Maybe we actually should replace those cabinets instead of just paint over them. Like, that's valuable information to have.

It's your recon. It's your research. And that's how you stay up above the competition. It's how you maximize your rent. It's how you minimize your vacancies. And so that's what we've learned to do because every market is different. Sure. And that's proactive instead of reactive.

And sometimes you don't realize those savings until a year later when you kind of take a look back at the year prior and see, okay, you know, I did a lot less there because of some smart spending in between tenants, you know, and it's what you and I know from owning, you know, properties and multiple markets over a period of years. And we've learned all this from looking back real time, you know, and seeing how we did these things. But that's hard sometimes going in to kind of understand that, okay, look, I'm spending this 500 here because all you're thinking is I'm spending 500, oh, man, you know, rent's going to, you know, it's rent for 800. I'm basically eating up most of my rent, you know, and you're not thinking about that. But you look at it a year later. And it could be thousands and thousands. When that tenant signs a new lease, right, because they want to stay. Exactly. Or they say they stay for multiple years because you have a nice, well-tained, clean property that looks better than the Joneses. Right. Right. Right. Exactly. And also another aspect of this you want to keep in mind, and this is a big mistake and a big trap a lot of new investors fall into is that they renovate and rehab their properties as if they

themselves were going to live in them. And big mistake. Big mistake, especially if you have high standards, especially if you, you know, if you like the finer things in life, that can be a big trap and turn your winning investment into a losing proposition. It is a trap. Or take you years to get your money out of. Sure.

And I remember especially, you know, early in microbreasted. career bringing in, you know, clients and investors I was selling to. And they were like, we'd like this color in this bedroom. We'd like this. We'd like that. And I had to learn to say, nope. Like, wait, you're telling me, I'm buying this property. I'm the investor buying it. And I can't choose my own paint colors. Yep. That's what I'm telling you. And I have to explain to them, look, I'm saving you from yourself. Right. All right. What's going to happen is you're going to paint these all different colors. Okay. Two years from now when this tenant moves out or three years from now or whatever, we're going to have to go back and remember what all these

colors were. And even if we catalog those and it's four different colors, you're just talking about now that's a whole trip to Home Depot. That's more time. You know, that's more time that you're either going to pay a property manager or the property manager is going to resent you because you've created unnecessary work for them versus, hey, everything's the same color. And guess what? Guess what it's going to be when we go back in? The same color. Same color. You know, so super simple. And it's, these are the little fine-tuning. These are little tweaks that really make the difference between, you know, an 8% cap rate and a 12% cap rate. For sure. long run. You know, it's these little things. So, you know, you're making money on the buy guys,

but then it's all the management and it's all the things you do in between renters and all these little fine tunes and fine tweaks that you make that really, you know, gets you, bumps you up another percentage in that cap rate, you know? So you got to look at it as a long term, because that's what everything we're doing here is based on, right? It's about buying properties, cash flowing and doing it for the long term, hold that house. I mean, that's the whole purpose of this podcast. So think about everything as a long term business. You know, not what is this going to cost me today, but what is it going to cost me not to do this today?

And that's the right kind of mentality. I like it. Well, on that note, that's it. That's it for today. This is a good episode. A lot of, there is, just as the 10 commandments to managing property managers are for our work month, how that cost us thousands and thousands and thousands of dollars, not to mention the years of experience to put that together.

The tips on these renovation tips that you just got today, these rehab tips, ask us how we know about these. Yeah. Because we've already made the mistakes and we know it works. We've learned everything the hard way you and I. Yes, we have. Yes, we have.

As much education as we've invested in. We still have, you know, we got our real education out there, that other school. But that's good news for all of you out there. That's for sure. For sure. All righty. So that's it for today. Flipping houses can make you rich.

Holding them will make you wealthy. We'll be back next week. Until then, remember, don't wait to buy real estate, buy real estate, and Wait. Hold that house! Contrary to popular belief, a lack of funding is not the biggest barrier to starting a business. It's excuses. But don't let a lack of funding be your excuse.

We are Epic Fast Funding, and we'd like to fund your business with up to $150,000 in revolving credit lines. If you've got 60 seconds on a solid credit score, you could have access to your funds in as little as seven days. Go to Epicfastfunding.com to fill. out our 60-second application. It's fast, it's simple, up to $150,000 in as little as seven days. Go to epicfastfunding.com. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com.