Rehabbing The First Unit In Our New 7 Unit Building

At the start of August we bought this 7 unit building.  It came with 3 of the units rented out, 2 of the units being vacated by a previous tenant, and 2 units filled with stuff from previous tenants.  Fun.  How do you eat an Elephant? One bite at a time.

When we first took possession of the building we started working on emptying the trash out of the 2 units that were left behind.  Roughly 3 weeks into owning the property the previous tenant who was in the process of moving out of 2 units (1 residential 1 commercial) finally vacated and we gained possession of those units.  The most efficient path forward was to make the 1 residential unit rent ready.  Getting this unit rented out would take the property out of the red on a monthly basis and would be the easiest to fill, as residential units are in high demand right now.

State of the Unit:

The previous tenant left the unit clean and removed all his belongings.  On the downside, he had 3 dogs and they had a room of the apartment that they had destroyed.  It smelled terrible and they had clawed the wall boards to shreds.

Aside from that damage, the rest of the problems with the unit are issues with age and degradation.

• Lighting: All these units were originally offices and have way more lights than needed. These rooms have ceiling tiles and each small bedroom had 3 2X4 fluorescent light fixtures.  These fixtures had diffusers that had yellowed over time and didn’t allow much light to come through. On top of that the math gets crazy with these lights.  Each fixture holds 4 40W fluorescent tube bulbs.  This is 160 watts each.  X3 lights. This is 480 watts being used every time the switch is flipped.  A normal room has 1 to 3 LED bulbs that use 9 watts a piece, so we are at 480 watts vs 18 watts, just for 1 room.  The electric bills had to be a nightmare.
• Ceiling tiles: All the ceiling tiles are different colors.  Some are much older and even the grid has yellowed over time.
• Walls:  All of the walls need patched and painted.
• Shower: The shower is in one of the bedrooms.  The bathroom was originally for offices so it is small and only has a toilet and a sink.  Why on Earth they decided to put the shower in the bedroom is beyond me.
• Sink: The sink has a constant leak and the drain has a leak, so both need repaired. A bucket catches the water and a 5 gallon bucket gets filled every 24 hours, so it must be emptied every day.
• Living room: The living room has a glass sliding receptionist window that needs to go.  The 2nd part of the living room that in the future will be a bedroom has a massive built in shelf that is partially destroyed.
• Doors: One of the doors was off its hinges.
• Appliances: The apartment came with a stove and a fridge and both are in clean, usable condition!

The shower had been in the upper left corner of the upper right room. We moved it to the small 64sq ft room.

This unit is a 2 bedroom, however in the future it could be a 3 bedroom.  The 2 rooms on the right hand side are the bedrooms and they have functioning windows.  The upper left room, which is a 2nd living room, could be turned into a bedroom if the window were able to be open, currently it has a fixed window. If we were to adjust the window through it would need to meet today’s code, so not only would we need it to open, we would also need the window to be lower.  This is doable, however it would have added to our timeline and cost.  We will likely pursue this the next time the unit flips.  A 3 bedroom over a 2 bedroom should bring in an addition $200 of monthly rent.

Overall this unit was not in terrible shape.

Repairing the unit:

The first thing I attacked was the dog smell. I deep cleaned and scrubbed the walls and the floor in the dog room. This reduced the smell by 90%.  In addition to the dog room I also scrubbed all of the floors like this to give us a clean surface to work on. This cost $0.

The next project was the lighting. I removed a total of 7 light fixtures from the unit, which would save 1,120 watts per hour if all the lights were on.  I then did some trial and error and bought replacement LED bulbs for the remaining light fixtures.  These cost around $8 a piece, but are only $5 if you buy a 25 pack.  These were direct replacements.  I had 1 fixture that would not take the T8 direct replacements and I needed to use T12 replacements.  T12 bulbs are equivalent to the 40W bulbs and T8s are equivalent to 32W bulbs.  The T8 replacements that I purchased use 18 watts per bulb.  I only install 2 per fixture and it produces plenty of light.  I also replaced the diffusers.  These cost $10 each.  Spending a total of $20 per fixture.  This is still much less expensive that switching to LED fixtures and is less of a pain in the butt, with effectively the same result.

I started with 16 full fixtures using 160 watts each for a total of 2,560 watts used per hour with all lights on. I ended with 9 fixtures using 32 watts each for a total of 288 watts used per hour with all lights on. This is an 89% reduction in cost, and it is brighter.  I spent roughly $220 on lighting. To be fair I didn’t use all the bulbs I bought so the real cost is closer to $120.

In addition to saving on the electric bill and making the apartment brighter, these light upgrades also increase the margin for the electrical system.  This unit has 100 Amp service and reducing 2,272 watts of power if all lights are on reduces the total amp draw by 18.9 Amps.

I will say that another great feature of this unit is the passive sun light and winter solar heat gain.  There are 2 large South facing windows and 2 large West facing windows. You can feel the heat radiating into the rooms from them.

Painting:

No question about it I needed to paint the ceilings more than anything.  They just looked terrible.  I cleaned the grid prior to spraying.  I have never used a paint sprayer before and was apprehensive. I have gotten really proficient at painting with a roller and a brush and the learning curve for spraying felt steep.  Spraying is the only way I could do the ceiling.  There is a few inches of insulation on top of the ceiling tiles, so removing them caused a massive mess. I had enough of that with removing the light fixtures, I had no desire to completely remove and replace each tile to roll them.

With spraying its all in the prep work. This was mentally challenging for me because normally I walk into a room and start painting right away.  With spraying the windows, lights, doors, and floor all need to be taped off.

I white washed everything which made it so I did not have to tape off the walls from the ceiling and this saved a good chunk of time.  I watched a few videos that helped me trouble shoot issues I ran into.  The primary one being to use a paint roller right after spraying to spread the paint out evenly.  This made the walls look much better and allowed me to get away with a single coat in the 2nd room I did, most of the rooms I did 2 coats though.

Just to be clear, I do remove all the switch and outlet covers before painting, I then replaced all the switches, outlets, and covers. No “landlord special” here.

I spent just over $400 on paint and paint supplies.

The shower:

We hired out the shower move. We used a contractor that we had used on another property.  He charged $1,500 to move the shower setup from the bedroom into the old dog room. This also included installing the new shower.  The most difficult part here was drilling through the concrete floor.  We bought a single piece shower from Menards for around $600.  Here’s where I screwed up: The shower was too big to fit through the door to get into the new shower room. The shower room had 2 access doors and we planned to eliminate 1, so since the door jamb had to come out anyways we also cut the wall to allow the shower to fit through, then rebuilt the wall.

After the shower was installed I framed a wall on its side to give it more stability.  We also refloored this room. Since this is a small room this was extremely cheap.  The shower project was by far the most expensive part of this project and we spent roughly $2,100.

Electrical:

After painting each room I replaced all of the outlets and switches.  Most of these were easily 30 years old and were showing significant signs of wear. One thing I love about these units is the electrical panels are in the units themselves which makes tasks like this much easier.  I spent under $90 on new switches, outlets, and covers.

Sink plumbing:

The sink plumbing cost roughly $70 between replacing the faucet itself and the drain plumbing. No leaks is a good thing, especially on a 2nd floor!

Trim:

I hate trim so much.  This is mainly due to the high cost to low function ratio.  Trim is just for looks and even the cheapest baseboard trim costs $15 for an 8 footer at Lowes.  We bought most of our trim at Menards, which is further away, but still, trim is pricey.  Part of why we needed so much was because we had to remove degraded cove base and it was glued heavily to the wall. We needed the 6″ trim to cover this damage. I’m also not very good at trim, which doesn’t help.  This is one of those tasks I’ve done a lot but just can’t get to proficient on.

Final touches:

The shower room was done, the walls were reconstructed, the whole apartment was painted and everything worked.  I installed 3 smoke detectors and a Co2 detector (roughly $120).

We started working on this unit around Sept 2 and finished October 6th. Typically we worked on the property Monday through Friday during school hours.  There were a few days that we skipped due to other projects going on. I would estimate combined Mrs. C. and I had around 150-200 hours into this rehab.

Spending:

In total we spent $4,070.31 on rehabbing this unit. The biggest cost by far was the shower move.  We paid $1,500 for the new shower to be installed. This included running new supply lines, drilling a hole in the concrete floor for the drain, running a new drain, and connecting everything.  We paid $611 for the shower itself.

• $2,111 Shower
• $431 Paint
• $276 Trim
• $263 Drywall, Nails, Paneling
• $231 Lighting
• $145 Flooring
• $135 Pantry
• $130 Plumbing
• $97 Electrical
• $91 Door hardware
• $160 Misc.

$4,000 was more than I wanted to spend to get this unit ready, but it needed to happen. There honestly isn’t much we could have saved money on, I think we did the budgeting very well on this project.  Perhaps I could have kept the cove base in a couple rooms and saved $150 on trim.  I could have bought a cheaper shower and saved $200 and I could have installed cheaper tiles in the bathroom floor and saved another $50.  I’m really struggling to find over $500 of savings in this budget.

We paid $36,100 for the building, so each of the 7 units cost just over $5,000 to acquire.  This rehab puts our “all in” cost on this unit at around $9,000.

Mistakes:

This one was rough. One day I went over to work on the apartment and when I arrived I set my car keys and the unit keys down on the counter when I came in. I spent the morning painting and a little before noon Mrs. C. arrived.  She came in and also set her keys on the counter.  A friend of ours stopped by and we showed her the building…then we went to get back into the unit and it was locked.  I had another key at home, but since both our sets of car keys were in the unit it didn’t matter.  I ended up kicking in one of the doors.  Had I realized how much of a pain in the ass to fix this was going to be I would have walked home and got the extra key.  I tried to swap out the door with 1 of the 12 extra doors I have in the basement but the hinges didn’t line up right.  I then bought one of those door reinforcement blocks, and it didn’t fit.  I found the right one to buy and it was $50!  doh!.

Approval:

Once the apartment was ready we contacted the city to schedule an inspection. It must be inspected and given a certificate of occupancy before we could rent it out.  We had 2 issues we needed to repair and fixed those that day.  We had a broken ceiling tile in the hallway leading to the unit that needed replaced and we needed to put a cover over the breaker box.

We had a prospective tenant with a section 8 voucher interested in the property so in addition to the city inspection we also needed a Section 8 inspection.  She verified that she could sign a lease and pay cash prior to their inspection and she would not lose her voucher. We signed a lease the same day as the city inspection, and we are currently waiting on the S8 inspection.

Signing the Lease:

We leased the property for $900.  This is the same lease price that a large apartment complex near us charges. Our apartment is roughly 100 square foot larger and includes heat and hot water in the rental price. The only utility the tenant is paying is electricity.

Some people think this is high for a 2 bedroom apartment.  Keep in mind the tenant is not paying for most utilities.

• Rent: $900
• LL provided water/sewer/trash -$75
• LL provided gas hot water – $25
• LL provided gas heat (avg) -$100
• Comparable Actual Rent: $700/mo

Next steps:

With this unit rented out we will be pausing this property for primary work.  The lion’s share of our attention will be on the rental house we just purchased in our neighborhood that needs a full rehab and will be an Airbnb.  I will still work on odds and ends jobs on this property when time allows.  I am getting improvements to exterior lighting completed and emptying out the basement.  Once the basement is empty we can rent out at least 1 of the rooms for storage.  This should bring in around $200 to $250 per month, every bit helps!