We purchased this 4-unit property in Albany in August - the cash flow was what we were seeking, where we could make income without worrying about the studio apartment. We knew this unit was not quite at the same condition as the others, which were in far better shape. We also knew it would be vacant when the property was turned over to us and that we could have our way with it. This generates a nice opportunity that other investors might overlook.
You can see in the photos above that the prior owner did nothing to this unit for years. We later found out from neighbors that he was going around the neighborhood BRAGGING about the fact that he hadn't touched the unit cosmetically in over 10 years and it showed (especially when we ripped up the carpet and filled our vacuum over 3 times with a layer of dust and sand from 200 square feet of floor, DISGUSTING!). Our tenants agree that we set a higher standard for our properties.
While this studio's potential income helped to justify our purchase, we knew comps in the area (Comps: what other similar units are being rented for in the adjacent neighborhood) catered to a higher rental price, thanks to a face-lift. We will touch more on the numbers in a minute.
Once we got into the unit, we were disgusted with the condition, so we determined our strategy to maximize our cash flow. We decided as a team that we would tackle the project ourselves to save a substantial amount of money and to earn experience, but by hiring help where we needed it.
This is what we chose to tackle before re-renting:
As you can see above, two days of work paid off. We increased the effect of natural light in the unit, which made it more bright - with new flooring and walls, a new tenant will have a higher sense of obligation to keep it in such good condition. It is hard to believe that this is the same unit as the before pictures.
A little elbow grease, imagination and A PLAN really went a long way. We spent 2 full days at work and hired someone to do the floors (which took a half day). In the process of doing this work, we reinforced some lessons: how to clean and paint effectively; being a lazy landlord is not worth it.
We also learned the true lesson of creating a scope of work and putting together a solid plan. If we didn't go through that effort beforehand, we would not finished the project in such a short period of time.
Don't be a cheap/lazy landlord. It is a no-brainer - while you increase the rent of your unit (and cash-flow), you are also increasing the value of your building. We enjoyed this renovation; it was therapeutic, and beneficial to our bottom line. When we look at the before and after pictures, we can be proud of the work that we put in. We can say that this unit is as beautiful as it is now because of the work that we did.
Besides the cost of gas, our work and time, here is how the numbers worked out:
Cost of carpet & flooring materials: $591.86
Cost of Labor for floor and carpet installation: $435
Cost of paint and other materials to complete entire scope of work: $426.74
Total cost of job: $1,453.60
Unit rental before: $500/mo.
Unit rental after:$675/mo. (and we could have easily gotten away with $700/mo.)
Total rent increase per year: $2,100
Total profit from rent increase alone for year one ONLY: $646.40
This renovation will be paid for in less than a year in the rental increase alone, not to mention the years to come. In all honesty, even without renting this unit, this property is cash flowing; renting this unit will just be additional money in the bank going forward. Who doesn't like an extra $675 cash per month?