October 15, 2013

Preparing Our House To Rent It - Lessons Learned

We recently went through the work of cleaning out and fixing up our old house to turn it into a rental. 

At first look the short list of things we needed to do were :

  • Haul off some stuff
  • Clean house
  • Cut down two trees

I figured that would be easy enough.  Shouldn't take long right?  We'll have this place ready and rented in a couple weeks.  No problem!

We set about getting the place ready.  We hired the guy to cut down the trees and decided to hire a service to clean the house.   The trees in question were 20-30' high so I could not cut down those trees myself and we had to hire that work out.    Hiring a cleaning service was a choice we made because we wanted to get the place ready to rent quickly and honestly neither my wife nor myself wanted to do the work ourselves.  The last time we did a rental prep from my wife's old house we did ALL the work ourselves.  We found from that experience that things took longer than we thought and doing everything ourselves ended up losing us more in lost rental income than we saved if we'd simply hired people to do a lot of the work.    So this time we vowed to not make the same mistake and hire work out in order to get it turned over quickly and making us rental income.

Unfortunately our quick and easy plan wasn't as easy as we'd hoped.

In reality the list of things we had to do was (in no particular order) :

  • Haul off some stuff
  • Clean house
  • Cut down two trees
  • Make a couple trips to charity to donate items
  • Haul an old couch to the dump
  • Clean interior walls

  • Paint most of the interior walls
  • Mow the lawn
  • Replace the burner pans on stove
  • Swap out old dishwasher for another dishwasher
  • Replace the mini blinds in one bedroom
  • Repair portion of gutter that was lose
  • Replace some worn out electrical outlets
  • Replace a few light bulbs
  • Fix broken gate
  • Clean the gutters
  • Fix latch on shed in backyard
  • Shampoo the carpet
  • Fix nail holes in walls
  • Mow the lawn again
  • Fix up the flower beds, pull weeds and add bark dust
  • Haul away the wood from trees Clean up the back yard after tree removal
  • Sweep up front porch

I am undoubtedly forgetting some minor items I had to do but I think that covers most of it.

I did most of that work myself.   This is contrary to the idea we had about hiring people to do everything. 

First, here's the list of things I hired people to do and what it cost:
Clean gutter = $75
Shampoo carpets = $140
Clean up front yard and mow = $300
Cut down trees = $1000
Clean interior of house $350

Total spent to hire people : $1,865

List of items I did myself and how much I probably saved us : 
Hauling away stuff = $150 - $30 paid to dump for old couch = $120 saved
Painting interior = $1000 to hire painter (?) - $200 in paint = $800 saved
Replacing dishwasher = $150 saved
Clean up back yard = $100 saved (?)
Various other misc. fixes = $300+ saved (?)

I got quotes on hauling the stuff and replacing the dishwasher.  I'm making estimated guesses on the cost of painting, cleaning backyard and the various other fixes.

Altogether I figure I probably saved around  $1500 or more by doing that work myself.   Not bad at all for the time I put in.   I did not keep track of exactly how much time I spent working on the house.   I guess it was probably around 20 to 40 hours.

But ...

In the end it took a month longer than we hoped to rent the place.   That means we effectively lost at most a months worth of rent.    The rent for a month is $1100.    I also had to pay roughly $100 to carry the utility service at the house for that month.   Thats the minimal charges for electric, water, sewer and garbage.  That extra month also cost me $50 more to have the lawn guy mow the lawn while it was vacant.   Saving that $1500 doing the work myself took me a month and that lost month cost me $1250.  So if you figure in that lost month then the net savings of doing all the work myself is about $250.     Taxes also differ either way.   Doing it myself I've got write offs of about $100 for the utilities and around $300 for materials or $400 total.   If I'd paid someone else I'd be in for $1650 out of pocket expenses for the work but I'd be up $1100 in rent so I'd have a $550 deduction.  Thats about $150 more in deduction of which would save me approximately $50 in taxes between state and fed.    Bottom line after taxes I saved $200.

Based on a net savings of $200 that is not a great return at all.   I made in the vicinity of $5-$10 per hour after taxes for my time.

Now that makes it sound pretty bad.  That does assume that I would have been able to get all the work done and completed within a two week period.   In fact I don't think we even got the tree cut down and cleared out in that time.   The guy we use for tree work is not fast but he is good and and he's cheap.   Other quotes we've had are around double what he charged.   So going with the cheaper tree guy saved us about $1000 which is certainly worth doing as worst case we lost $1100 rent from his slower work.   I'm also making estimates on how much the painting and misc. work would cost and usually my estimates on such things are half of what the costs end up being.    So its quite possible that I would have taken 2-4 weeks to do the work even if hiring people and I might have paid $2000-$2500 to do that work.  Worst case if I'd hired everything it might have taken just as long and could have cost me $3000 more than I spent.

Its hard to know what would have happened exactly, and I can really only guess.    I can say that I didn't do a very good job of planning the work out and I'm sure I could have gotten everything done faster if I'd planned it better and hired more work done.   Given the demand we had for the property when we did rent it, I'm sure we could have made some more rent if we'd gotten it ready faster.

But ideally if I'd planned everything and just hired reasonably priced contractors then I could have saved a lot of my own labor and only spent a few hundred dollar more net.

Lessons I've learned for next time  :

1. Be more willing to have work done even if its work I know I can easily do myself.     This is a lesson I need to beat into myself since my first inclination is always to do everything myself.  I told myself after the last big project for my wife's house that I would pay for more work this time but then I lapsed into doing half of the work myself.

2. Start with a complete and accurate assessment of all the work that needs to get done.   One of the bigger problems I ran into this project was due to poor planning.   I started out with the perception that I really only had a couple main things to do : cut down two trees and clean the interior.  I hired people to do those items.  But then the project grew and grew and I realized all the other various things that needed to be done.

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