How Much Should You Spend on a Rental Property Rehab?

How Much Should You Spend on a Rental Property Rehab?



how much money should you spend on the repairs for your rental property that's today's video let's dive in hey everybody I'm Clayton Morris I'm the founder of Morris and vast and I've rehabbed hundreds of homes in my life and today we're going to talk about rehabbing and how much you should spend on the repairs and the rehab of your rental property if you're new to the channel hey thanks so much for stopping by do me a favor if you would subscribe click the little subscribe button down there and YouTube is added a new feature where you got to click the little bell to be notified when our new video is published in which we publish three times a week so take a few moments out of your workday and watch one of our videos to try to help you take action create passive income and real estate investing that's what this channel is all about so thanks so much for subscribing today we're going to talk about the rehab process now many of you guys are DIY errs you'd like to do it yourself and go out there find properties rehab them hire contractors hanging drywall getting new roofs hiring buying furnaces water heaters plumbing all those things and then finding tenants for your properties right well this is for you if you're a DIY ER and you want to know how much you should spend on a rental property that's what we're going to talk about today by the way I've got a whole playlist here for DIY errs who want to get things done themselves today I want to talk about the money that we spend now on all the rental properties that I like to buy I like to be in right around the forty fifty thousand dollar range sometimes sixty thousand is what I buy personally all in total cost of my rental properties is around sixty thousand dollars there are some things to consider when you get your scopes of work back from your contractors and the scopes of work say it's going to be about thirty thousand forty thousand dollars to me that would be a red flag I don't want to be spending more than you're ready for it there we go I don't want to spend more than about twenty to twenty-five thousand dollars for the repair of a rental property a couple of big reasons and a couple of key takeaways on this number one it's just too expensive there are too many fish in the sea for me to be spending that much money on a rehab unless for some reason it's in some great little Mitchie little Street that's in a little historic district and but I know that if I spent a little bit more on this that the equity is going to be higher remember I'm not really investing for equity and I'm not really investing for appreciation I want cash flow so if I can add a little bit more value by adding a few extra bells and whistles to a property that's going to then increase my equity long term because like I said it's in a historic area or something like that then I might go ahead and do it but for the most part I'm not going to want to spend more than that on the repair of one of my rental properties so my cut off most of my repairs are going to be in that twenty twenty-five thousand dollar range for repairs however that's depending on the purchase price so let me give you some round numbers to make it easier in your brain let's say we buy we acquire the house for twenty thousand okay and then we're going to repair it for twenty thousand that's okay that's a total of about forty thousand that's kind of where most of my properties hit maybe we acquire it for but I want those numbers to be kind of consistent though so maybe I acquire it though for twelve and I'm going to add and it's going to cost me about twenty eight thousand in repairs that's okay too you see what I'm saying that as long as I'm not going above where I'm comfortable buying my property prices so I'm not going to buy it for forty and then spend another forty on the rehab it just takes too much cash to do what I could do for far less understand another big reason I would stay away from more costly renovations is the time remember we're in this for the cash flow we're not in this to flip the house in order to make money on a flip we don't talk about flipping here on the show I don't care about flipping to me that's creating another job for yourself that's not investing flipping houses is not investing that's a paycheck you buy a house you add $50,000 to the house you flip it you hope you make a hundred thousand dollars take six seven months to do it eight months or even a year to do that kind of work that's not something I'm interested in doing so the longer you have to put work into this property if you stretch into five months on a rental property that's five months that you're not cash flowing so usually we can hit that eight to twelve week mark for a renovation especially if it's a heavy renovation that's a good that's a good number and you know you have to consider a bunch of different things in there too like severe weather or maybe there's snow on the roof when we can't switch the roof out so twenty thousand dollars twenty twenty five thousand dollars let that be a guide for you even if you like purchasing more expensive properties than I do like I said I I like to buy the forty forty fifty thousand dollar homes sixty thousand dollar homes right in that sweet spot but maybe you like to buy yours that are a hundred and ten thousand one hundred and twenty thousand that's too much for me but it might not be too much for you and therefore if you're going to spend two to three months doing a rehab on that property and you're going to spend thirty thousand dollars now you're at a hundred and fifty thousand dollars of cost and it's going to take you that long to do it to me that's just too costly there are too many great deals out there that you could find that are almost don't need a lot of work you could add five ten thousand dollars worth of rehab to and kind of be up and running in a less amount of time it really depends on your stomach for these types of projects but I would warn you against going too long and spending too much time on your rehabs for a rental property not a flip for a rental property I'm Clayton Morris I hope you found this video helpful again I've rehabbed hundreds of properties in that same price range so I kind of know what I'm talking about and when you start adding all these layers of complexity things tend to go wrong so stick with what you know stick with it being cheap and fast and you'll find that cash flow will come much more quickly to you please if you're not a subscriber click the subscribe button over here and become part of this community I'd love to hear your comments in the thread below you can type up your comments there as well as check out some of the other great playlists we have here on the channel we've got all kinds of playlists and videos to help you go out there take action become a real estate investor we'll see you next time everyone bye