When buying a rental property this is what I tend to look at when doing my walk through of a potential rental to gauge what it may cost me to get the house rent ready. These are some major costs your should consider when purchasing a new rental. First if you see that the property only has cosmetic items like paint, light fixtures, a major cleaning and other minor repairs that are not too costly, this is ideally what you want. The major cost come in when you’re looking at some of the following, the roof replacement, furnace and ac unit replacement, windows replacement, flooring replacement and foundation/structural.
Most of the items are going to cost a minimum of $3000 or more. An example is the cost for a new ac inside and outdoor ac unit for a 1200 sq ft house is approx $3000 plus taxes installed. The smaller the house the more inexpensive, the larger the more it will cost because there is more square footage. Also the cost can depend on the type of finishes or quality of materials you install. Personally I don’t like to install the cheapest product available, I tend to go up 1-2 levels from the lowest quality, the cost for the labor will be the same and sometime the difference in material cost isn’t that much for a nicer product and usually the materials will last longer. Not to mention you might be able to get a bit better quality of tenant. I also don’t go for the top finishes mostly because tenants seem to be hard on rentals. For example you can do your best to qualify a tenant but once they move in they might sneak in 3 dogs that can do a number on your floors. It’s happened to me a few times already and by the time you notice the damage has been done. My suggestion is once you’re in contract on a property hire a licensed home inspector who can identify the life left on this stuf, also many of them can give a rough estimate on the cost to replace. I have found that they tend to be a bit low on their costs and its usually about 20-30 percent more on top of their rough estimate. If the house is vacant the inspector will request that you have the utilities activated so that he can check everything.
After factoring the total costs for everything, if the property still looks like a good deal and your going to buy it, I would put aside an addition couple thousand just incase something come up or I go over budget which can often happen.
Written by Scott Esmail Professional Property Manager