Some people are addicted to booze; others gambling.
Me? Home renovation.
Three months ago, we finished a $13,000 remodel on Rental House #4. To celebrate, we told our contractor to demolish a kitchen in a different house.
Call it a victory lap. 🙂
We’re renovating House #2, and we’re coordinating everything — from demolition to final clean-up — through email, phone and text messages.
We haven’t set foot on the property.
Our contractor texted us this drawing of the kitchen.
While our contractor is tearing out floorboards, we’ve been racking up frequent-flyer miles. We’re as far away from the properties as possible (without visiting Mars.)
(Yet.)
Here’s a recent sleep-deprived snapshot after a red-eye to Shanghai:
“Your property is under renovation, while you’re hailing taxis in Asia?”
Yep.
“But …. how?”
This is possible for two reasons:
Reason #1: Home owners and investors are not the same species.
I’ve watched my friends, in the middle of renovating their own homes, grapple with existential quandaries like, “what color should we paint the dog door? Olive or khaki?”
That’s a vexing question for your own home, to be sure. But investors think differently. We build systems rather than browse Pinterest.
For example, we’ve started using the same paint color on every property — a strategy that minimizes waste, reduces tracking and streamlines touchups.
Investors hone this approach for a simple reason: we don’t want to work more than necessary. My investments hum in the background while I focus on my true passions — reading, writing, traveling, staring absentmindedly into space.
I waste more time scrolling Twitter than I spend managing my investments.
Reason #2: Scope, Systems and Strong Team
The second reason is that I’ve focused on a simple formula:
- Hire talented people
- Give them a detailed scope of work
- Get out of their way
(This works best for remove-and-replace jobs. If you’re re-designing the floorplan/layout, you’ll need to make a trip.)
We’ve nailed this strategy (hehe, pardon the pun) many times. Two years ago, for example, we invested $15,000 into renovating House #5. We managed this project by text message from California and Brazil.
Today we’re managing the House #2 renovation from Nevada and Nepal.
Okay, “managing” is an overstatement. We listened to the contractor’s recommendations, approved everything that sounded reasonable, and … well, that’s about it.
Then we hopped on a flight to Kathmandu.
Meanwhile, this happened —
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In today’s article, I’ll dive deep into how to save thousands on kitchen renovations. Well, kinda.
“Kitchen renovations” is a giant topic, and I’d rather go deep than wide. So this article will focus specifically on how to save hundreds on cabinets, countertops and flooring.
I’m excluding other components — like electrical, plumbing, etc. — to limit this article to less than 3,200 words. I’m aiming these tips at rental investors, although I hope that anyone can benefit.
I also disclose our past three months of rental income at the bottom of this article.
Here we go:
How to Save Hundreds on Granite Countertops
Granite countertops are synonymous with ‘fancy.’
But here’s a secret: you can install granite countertops for less than $500 in materials.
Granite pricing is influenced by four factors:
- Size
- Cut
- Style
- Edging
Let’s talk about how to optimize each one.
Size Matters
Granite is a natural stone that’s quarried from the earth. Large slabs of granite are a pain-in-the-butt to transport and install. Smaller pieces are easier.
Result? Granite slabs are expensive, but granite tile is an order of magnitude cheaper.
Here’s an example of a large slab. Imagine the cost of finding, quarrying and transporting this monstrosity:
You can get the granite “wow” factor for a fraction of the price by installing granite tiles, which are typically sold as 12×12, 16×16 or 18×18 inch squares.
We used granite tiles when we remodeled the Airbnb unit, for example. Here’s the result:
How much will this cost? Let’s calculate:
- The average kitchen holds 30 linear feet of countertop space.
- Add an extra 20% (36 linear feet) to prepare for waste/overages.
- This granite tile costs $2.88 per square foot (psf).
- Result? You could install granite tile in an average kitchen for $100 in materials (excluding mortar, backer board and bullnose).
Can I repeat that? $100. For a kitchen full of granite. Score.
In fairness, $2.88 psf is the cheapest example. I’ve found many colors/sizes at $5 to $7 psf, which would cost $180 – $252 in an average American kitchen.
Suggestions:
- Opt for the 16×16 or 18×18 squares. These create a nicer finish by minimizing seams.
- Lay the squares in a diamond pattern (also called diagonal layout). This also creates a more upscale finish.
- Use leftover tile to create a bullnose and backsplash.
Cut
If you want continuous (non-tile) granite countertops, you have two options: prefabricated or slab.
Pre-fab is the “off-the-rack” edition. It’s cut and polished overseas, holds more visible seams than a custom slab, and comes in fewer colors. But it’s significantly cheaper, while retaining a ‘wow’ factor that attracts tenants. It’s the better choice for a rental property. (And if you’re lucky, you might find clearance-sale prefab that’s cheaper than tile.)
Color
Common granite colors are called “builder grade.” (That’s slang; not an official title.) These are some of the most commonly quarried stones, and — due to their abundance — they’re inexpensive.
Examples include Baltic Brown, Ubatuba, Santa Cecilia, Venetian Gold, and my personal favorite, Blue Pearl (which looks amazing paired with white IKEA cabinets).
Edging
Countertop edges can be flat, rounded, sloped, or so-fancy-it-attracts-paparazzi.
Get the cheapest style. Don’t bother upgrading; it won’t yield rental returns.
As an investor, focus on the “80/20” upgrades. Laminate vs. granite can impact your revenue, but a standard edge vs. a flamboyant edge won’t do a damn thing to enhance your bottom line.
How to Choose a Durable Flooring Surface
Science lesson:
- If an object dragged across a floor is harder than the floor, then the floor will get scratched.
- If an object dragged across a floor is softer than the floor, then the object will get scratched — not the floor.
Eat it, Issac Newton.
The takeaway? Since goal #1 is durability, choose dense flooring surfaces. Examples include:
- Porcelain tile
- Some ceramic tile (not all)
- Rubber vinyl / vinyl plank
- Natural stone (e.g. slate)
- Edge-grain bamboo (NOT face-grain bamboo)
- Solid hardwood
Awesome. These meet our durability standards. Next step: sort by cost.
Stone, hardwood and edge-grain bamboo are expensive, so we’ll eliminate these options. Porcelain, ceramic and vinyl plank are cheaper, so I have my contractor shop in those aisles. We’re using 6″ x 36″ porcelain tile planks in both House #4 and House #2. The price and durability of porcelain + the ‘wow factor’ of hardwood = score.
Here’s how this looks in House #4:
Where should you buy this stuff?
Hint: Not the big-box retail chains.
The big-box retailers are great for basic materials like 2×4’s, screws, plywood, backer board and mortar. But shiny surface materials that people notice — like carpet, tile, faucets, appliances — are typically cheaper elsewhere.
(Like, MUCH cheaper elsewhere.)
Here are a few of my favorite suppliers:
- Amazon — I’ve bought fans, faucets, and even a gorgeous kitchen sink here. Highly recommended.
- Overstock — Ditto, especially for lighting.
- Floor and Decor — Hands-down, this is my favorite flooring store.
- Sears Outlet — The keyword is “outlet.” They sell scratch-and-dent appliances at an excellent cost.
- Brandsmart — Worth checking out if you don’t live near a Sears Outlet.
- Habitat for Humanity ReStore — Nonprofit home improvement store. Can be a source of cheap deals, but not systematic or reliable.
- Local mom-and-pop discounters — Google the name of your area + “discount” + a specific item like carpet. You’ll often find hidden gems.
- Build [dot] com — Meh. It’s okay for higher-end fixtures. Avoid this for Class B or Class C rentals.
- IKEA — Avoid their granite and appliances. Heck yes to their cabinets.
Speaking of which …
The Best Place to Find High-Value Cabinets
Cabinets are sold in three tiers:
- Stock — Off-the-shelf supply. Cheapest.
- Semi-Stock — Shipped in a few weeks. Mid-price.
- Custom — Built to your specifications. Expensive.
Here’s a quick rundown on materials:
- Particleboard – Made from wood shavings pressed together. Cheap. Least-durable.
- MDF – Made from engineered wood. Mid-price. Durable.
- Plywood – Durable. Expensive.
Several years ago, I Googled the name of my area + “outlet” + “discount” + “kitchen cabinets,” and found a discount mom-and-pop supplier. They sold wood semi-stock cabinets at an equivalent price as IKEA’s stock particleboard cabinets.
Great find, right?
Eh … not so fast. Simple is better than complex. When applying this lesson to cabinets, remember that simple = in-stock; complex = shipping.
I learned this lesson the hard way. Anytime you order an item, you risk a possible delay. That’s not a risk that you should take lightly.
If the cabinet shipment is delayed, the entire project can stall for a week or two. And if a house rents for $2,000 per month, a two-week delay costs $1,000 in lost revenue. Ouch.
In-stock wins the day.
I tapped IKEA for the House #4 remodel. And holy moly — I’m hooked. They’re in-stock. They flat-pack. They deliver. They’re easy to install. The base cabinets have self-leveling legs, so your contractor won’t fuss with shims. The wall cabinets hang from a suspension rail. These cabinets could only get better if they cracked jokes, cooked dinner and had six-pack abs.
Long story short: IKEA cabinets save time, and time is money — especially when you’re paying a crew by the hour.
Lessons at the 30,000-Foot View
How should you make decisions about remodeling jobs?
This isn’t a rhetorical question. Framework matters more than strategy, and strategy matters more than tactics.
Here’s what I mean:
- Tactic = How to catch a fish.
- Strategy = How to optimize fishing.
- Framework = “Should I fish?”
Learning how to think about an issue (framework) is more important than deciding what to do (strategy), which itself is more important than knowing how to do it (tactics).
I’d rather teach you how to think than tell you what to think. Of course, there’s only so much I can impart in a single blog post. But I’ll start with two ideas:
#1: Don’t Be Afraid to Iterate.
You can renovate to the standards of “viable,” “optimal,” or “excessive.”
Your choice between the top two options depends on (#1) your budget, (#2) your experience, and (#3) the strength of your team. It’s okay to create a “minimum viable” space now, and uplevel in a few years.
Four years ago, we executed a “minimum viable” remodel on House #2 to prepare the property for its first tenant. We installed cheap, flimsy carpet. We slapped laminate countertops atop 30-year-old cabinets. We didn’t build-to-last. We built-to-get-this-damn-thing-to-market.
Today, we have a stronger team, more knowledge and a more flexible budget. We’re renovating the house to a higher standard, and we’re coming at this from a position of strength.
Lesson? Don’t be afraid to iterate.
#2: Optimize for the Top of the Price Range — But Not Higher
Properties don’t rent for a fixed price, they rent within a price range.
If someone says “this house could rent for $1,600 per month,” that house might rent for $1,400 – $1,800, depending on its condition, seasonality, lease term and a slew of other variables.
When you’re renovating a property, shoot for the top of this range — but not higher.
As an investor, your job isn’t to hammer nails — it’s to make decisions. Your first five-figure decision will be judging the line between “optimal” and “excessive.”
What’s worthwhile? And what’s a total waste?*
[*Tip: Don’t apply those questions to your dating history.]
Many investors try to solve this with a straight-line ROI calculation — “will this upgrade increase the rent?” But that thought process is too simplistic. Rent and occupancy are inversely correlated; if your rent is $1 per month, your occupancy will be 100 percent. Conversely, if you ask for $1 million per month, your occupancy will plummet to zero. (Unless you own an ultra-luxe house, in which case, call me.)
The question isn’t “could this upgrade increase the rent?” but rather — “could this upgrade make the property more competitive?” Even if you can’t increase the rent, could you lower vacancy? Attract higher-quality tenants? Get multiple applicants? Improve retention? Reduce turnover?
Those are tough questions. They require judgment and subjectivity. They can’t be deduced with spreadsheets.
This is the art of investing.
Rental Income Report – Aug, Sept and Oct
I could write for days about renovation cost-cutting, but I’ll pause here.
Let’s reveal the Rental Income Report from the past three months.
If you’re new to this website, here’s the background:
Will and I own 7 rental units. These generate around $10,000 per month in top-line revenue. After expenses, the properties bottom-line (net cash flow) roughly $3,000 – $6,000 in a typical month (when we’re not renovating).
We average 3 to 5 hours per month (1 hour per week) managing this portfolio. You can read the history-at-a-glance here.
Rental properties give us the freedom to stop worrying about day-to-day expenses. We could retire in Bali tomorrow. Personally, I’m a Type-A serial entrepreneur — that’s how I’m wired — and now I can take risks and embrace failure, without feeling pressure to put food on the table. This peace-of-mind helped me build this website and my podcast, among other ventures.
I enjoy teaching others about the benefits of rental investing. But over the years, I’ve heard many readers voice misconceptions about rental investing, ranging from “that’s a full-time job!” to “wahoo, free money!” — neither of which reflect reality.
Rentals are neither as bad nor as good as many people assume.
To quash these myths, I decided to publicly disclose the income, expenses and hours per month that we spend managing our rentals. I hope this no-holds-barred case study helps paint a more realistic picture.
If you’re new to these reports, please read the FAQ HQ, which answers many more questions.
Here we go:
August 2016
In August, we netted around $4,400 (after expenses) with 6.5 hours of work. Wahoo! Here are the specifics (each link below opens the history of that property).:
Unit 1, Triplex: $2,915
Unit 2, Triplex: $1,490
Unit 3, Triplex: $1,330
House #2: $850.50
House #3: $1,273
House #4: $0 (listed on the rental market at the start of the month)
House #5: $707.00 (after minor maintenance deductions)
Total Income: $8,565.50
August’s gross income is $8,565.50, after management fees and small repair deductions. What about other expenses?
Mortgage, PITI for Multiple Properties: $3,182.64
Mortgage, Part II: $583.33
Lawn Care and Maintenance: $221.86
Water: $176.48
Home Depot: $14.62
Total Expenses: $4,178.93
This means ….
August 2016 Net Cash Flow: $4,386.57
Time Commitment: 6.5 hours
We finished renovating House #4 in July and started marketing the property in August. Will spent 6.5 hours reviewing and updating our marketing materials — the listing, canned responses, open house material, etc., plus replying to a few emails about the triplex.
Overall, I’d call August a great month! Let’s move to September …
September 2016
Renovations started on House #2 in September. Dun-dun-dunnnn! Prepare for negative territory. We dug into the business coffers, spending several G’s upgrading House #2. Here are the numbers, laid bare for your amusement:
- Unit 1, Triplex: $2,915
- Unit 2, Triplex: $1,490
- Unit 3, Triplex: $1,330
- House #2: $763.38 (our property manager sent us the final payment)
- House #3: $1,273
- House #4: $0
- House #5: $840.00
Total Income: $8,611.38
September’s gross income is $8,611.38 after management fees. What about expenses?
- Mortgage, PITI for Multiple Properties: $3,182.64
- Mortgage, Part II: $583.33
- Property Taxes: $507.43 (partial payment for a house we own free-and-clear)
- Insurance: $116.00
- Lawn Care, Gutter Cleaning and Pest Control: $284.00
- Water: $139.52
- House #2 Contractor Labor: $5,300
- House #2 Materials: $4,536.92
- Credit Card Annual Fee: $95.00
Total Expenses: $14,744.84
This means ….
Cash Flow: $-6,133.46
Negative, baby!! It’s renovation season! Okay, what about time costs?
Time Commitment: 8 hours, 45 minutes
We spent an hour reviewing and updating the House #4 lease (and signed a new tenant!) We also invested 2.5 hours replying to emails and calls related to the newly-renovated House #4.
Meanwhile, House #2 became vacant, so we planned a kitchen, bath and whole-house-flooring upgrade. It’s a simple remove-and-replace job, which means we’re not changing the floorplan or layout. This makes the remodel much easier than House #4.
Given the limited scope of work, simplicity of the property and the fact that we’re fresh off another remodel (our skills are sharp!), we planned the House #2 remodel in just 2 hours. That’s a new record low. We spent another 2.5 hours coordinating specifics with our contractor, such as listing the precise item numbers he’d need at IKEA, etc.
Finally, we spent 45 minutes coordinating lawn care and pest control on House #1 (the triplex).
TL;DR — We spent 8.75 hours managing our rental portfolio in September, and we invested heavily in upgrades — leading to negative $-6,133 in September’s cash flow.
Ready for one more month? Here’s October:
October 2016
- Unit 1, Triplex: $2,915
- Unit 2, Triplex: $1,490
- Unit 3, Triplex: $1,330
- House #2: $0 (under renovation)
- House #3: $1,273
- House #4: $1,795
- House #5: $0 (tenant late; our PM is handling everything)
Total Income: $8,803.00
What about expenses?
- Mortgage, PITI for Multiple Properties: $3,182.64
- Mortgage, Part II: $583.33
- Insurance: $199.44
- Lawn Care, Gutter Cleaning and Pest Control: $105.00
- Water: $164.16
- Office Supplies: $84.78
- House #2 Contractor Labor: $5,500
- House #2 Materials: $3,801.01
Total Expenses: $13,999.01
Leading us to …
Cash Flow: $-5,196.01
We’ve invested $20,000 into the House #2 renovation ($19,137, to be exact) in the past two months.
If you’re a longtime reader, you might remember that we bought House #2 for $21,000 and spent $10,000 improving it to viable, rent-ready condition. After these past two months, our total investment in House #2 is a cumulative $50,000.
Not bad for a property that rents for $945 per month.
Time Commitment: 4.5 hours, almost entirely coordinating with the contractor (and a little bit of chatter with the triplex tenants).
Bottom Line
Most real estate “gurus” only talk about top-line revenue. “I collect $10,000 in a month!,” they’ll proclaim.
Great, but how much do they spend?
I’m not a “guru;” I’m just an ordinary investor with access to the Internet. When I write, I prefer to show you a complete set of numbers — our income and expenses — and contextualize this with the time commitment that’s involved. You’ll get a fuller picture, I hope, through this first-person case study. And you can draw your own conclusions.
One word of commentary, though, about the past few months —
We’re reinvesting, and this yields negative cash flow in the short-term. Don’t let this scare you. Rentals are a long-term game. More accurately, ALL businesses and investments are a long-term game.
You might spend years building a website, product or service before it’s profitable. You might hold onto an index fund for decades. You might invest years into gaining the education and skills that evoke the promise of a better life.
Quick-hit, get-rich-fast promises are either risky, hollow, or both. The question I’d encourage you to ask yourself isn’t “what’ll get me a private jet the fastest?,” but rather, “what’s a solid long-term plan for my future?”
Maybe it’s rentals. Maybe it’s not. But as I said earlier in this article, your mental framework is far more important than any tactic.
You might not know the answers yet. And that’s fine — as long as you’re asking the right questions.
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>> If you made it this far, you’re a little interested in rental properties. C’mon, admit it.
>> If you’re reading this, join the free VIP List. You’ll be the first to hear about Your First Rental Property, the upcoming course I’ll be releasing next year. Currently in beta. <<
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Image courtesy Flickr.
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Lookin good Paula! (the renovations not you personally although you’re also looking swell). I love the no holds barred look into your cash flow. It provides a baseline for realistic expectations which is great for new/would be landlords like myself. Keep up the great work!
Hey Paula!
Im in love with vinyl plank flooring for rentals. But it HAS to be the click kind, if you get the sticky kind you will regret it for the rest of your life. I learned the hard way on that. 🙂
I did granite tile in my primary residence and it looks great. Im surprised you put that in your rental though. Is it because its strictly an airbnb and you wanted it to stand out?
I would have figured laminate countertops for rentals.
Hi Alexander –
High-five on the granite tile!
I put granite in almost every property in order to stand out from the competition. The additional cost (laminate vs. granite tile) is almost-zero.
If the granite tile attracts a higher-quality tenant (e.g. multiple applicants that we can choose from), or if it shortens a vacancy by even one additional week, then it’s more-than-paid-for-itself many times over. It’s super-attractive — and it’s so cheap!! 🙂
Great Article Paula! Glad I found it through my company’s intranet site. Your writing’s got a good flow and is so much easier to follow.
I’ve got granite slabs and all stainless steel appliances, 2100 sq ft, 4 beds, 2.5 baths in the house that sits in the walking distance to 10 rated Elementary and High School. But it’s sitting on the market since Nov 15. What am I doing wrong? People busy putting up the trees for the Christmas? 🙂
Great article! We have a kitchen reno in our rental property coming soon and these are great tips!!!
Paula thank you for sharing these real details about your rental properties. I bought two rental properties in and around the Vancouver BC region last year and have been learning so much from blogs. I am happy to have discovered yours, just this week! My properties are condos because of the high cost of entry around here, but your examples allow me to see I am on the right track. Are your properties clustered in a certain area? In the beginning, how did you find your contractor and or tradespeople? How do they access your places to do the work when you are away travelling? Have you ever organized updates while the tenants are living in the units? And, does PITI stand for principle/interest/taxes/insurance? You have included PITI, as well as a separate line for taxes and insurance in your list of expenses. Could you explain a bit further?
Hi Simonne –
I answer most of these questions in the FAQ HQ, but to briefly go into it:
1. Yes, everything’s clustered in the metro Atlanta area. (I live in Las Vegas).
2. My primary contractor (for major renovations) is someone whom I found through a referral from another investor. My property management company also hires/manages contractors for minor repair/maintenance jobs.
3. I keep a lockbox on every property.
4. Do not renovate while a tenant is living in a property. Your tenants have the right to quiet enjoyment of the property.
5. Yes, PITI stands for principal, interest, taxes and insurance. We also hold an umbrella insurance policy.
Here’s the FAQ HQ: http://affordanything.com/real-estate-investment-cash-flow-report/
I enjoy reading about your rental adventures. It has led me to think being a landlord isn’t for me, at least not yet. If I do make the jump in the future, it will be with a management company that handles essentially everything.
Awesome tips, I will definitely revisit this when it comes time to consider upgrades in my rentals. I’m another example of someone who will be managing all this from far away.
I know you are addicted to renovations, but being the owner of a rental, you also usually have the option to push off projects until you are ready. For example, you could keep the original cabinets (maybe with a little repair work) and rent it out again at a lower price, pushing off the cabinets + counter-tops until after that tenant moves out.
I got some “salvaged planked elm” Formica countertops for my first rental and they look AWESOME!
Ps. I got my first rental thanks to inspiration from you and bigger pockets. Currently in reonovations bit hoping to be listed for rent in 2 weeks!
This was a really interesting teardown. Can I ask what the IRR is for the rental properties in a given year? I’ve been thinking pretty hard about rental properties recently – I currently derive all my passive income from bonds and dividends.
I figure it’s investment properties are worth thinking about if I can get the IRR (income plus appreciation against my initial investment) above 10%, hopefully closer to 12%.
And do you guys use a management company?
We focus on Cap Rate rather than IRR / MIRR. You can read the cap rate analysis on each property by clicking on the link to each property in the ‘income’ section.
And yes, we use a management company for some of our properties, which I describe in the FAQ HQ: http://affordanything.com/real-estate-investment-cash-flow-report/
Hi – I’m new here and have a question for anyone who’s like to give advice. Do you think it makes sense for people in their mid 50’s to begin investing in real estate? The time advantage is gone at our age and it’s unlikely that we’d be able to pay off any properties we buy. Our own home is finally paid off though. Thanks for your input!
I think so, yes! If you buy the right property, you can start collecting cash flow immediately. Your cash flow can also grow over the years as you raise the rent.
Let’s say that in Year One, you collect an extra $2,400 in passive cash flow. Then every following year, you raise the rent 3%, but your fixed-rate mortgage payment stays the same.
After only 5 years, you’d have collected more than $14,000 in extra passive income, PLUS you’d have the equity growth that came from mortgage paydown. That’s pretty solid, in my opinion.
We did a kitchen reno in one of our rentals last year. But we enjoy doing the word ourselves. Maybe one day we will hire it out, but for now we get a kick out of it. Total cost came in under $3500. The house is worth more, the rent is higher now, and it’s more rental-able. This next year we might tackle some bathrooms. =)
Paula,
Thanks for the wonderful information on rental renovation. I’m looking to purchase my first primary residence next year and want to acquire rental properties soon after. I’ve been wondering “how much is too much” when it comes to renovation. You’re article is very, very helpful!!
I’m curious as to why you say no to IKEA appliances. They are extremely affordable and have an amazing warranty program. We used and have been highly impressed so I would like to hear your opinion!
Thanks!
Hi Britt –
I’ve found much better deals at Sears Outlet, Brandsmart and Amazon.
I’d recommend checking out the Consumer Reports appliance store guide, which helped me a lot: http://www.consumerreports.org/cro/appliance-stores/buying-guide.htm
Thanks for asking!
Paula,
I love how detailed you are about getting the cheapest supplies. Ikea cabinets are not something I realized were so great!! I love seeing your REAL NUMBERS!!!!! It helps potential investors understand what to ACTUALLY expect. See you soon!
Wow the renovations always look easier on HGTV. Great job on the renovation work. I heard of Ikea being made from cheap material, would you say that is true so far?
The short answer: You’ll get good durability if you buy IKEA cabinets made from MDF with a melamine coating.
The long answer:
Here’s a quick rundown on materials:
• Particleboard – Wood shavings pressed together. Cheapest. Least-durable.
• MDF – Engineered wood. Mid-price. Durable.
• Plywood – Highly durable. Expensive.
Most IKEA’s cabinet boxes (the main box) are made from either MDF or particleboard.
The doors and drawers (at the lower end of their cost spectrum) are made from either a wood veneer on particleboard or fiberboard topped with melamine foil, which is a type of laminate coating that’s used in Formica. Melamine is an easy-clean-up coating that many investors — myself included — prefer in their cabinets. The major issue to watch for (with melamine) is de-lamination.
What a great post. We are currently renovating a rental that I just purchased (2-family). we’ll live on one side and rent out the other. So far we are doing ALL of the renovations on our own. (even demolition). Too expensive to do it any other way. I was already implementing a lot of what I read here but also got some new ideas that I can’t wait to use on the next one!
This is a great guide of potential kitchen renovations that anyone can make. Making simple renovations can greatly increase the value of your rental property and what you get out of it. It’s nice to see an example of this in action. Thanks for sharing Paula!
Excellent article. I’ve been a contractor for years and am considering entering the real estate market with an investment property. Your advice and instructions are right on with regards to the materials and expenses that you list.
The detailed income/expense report is great and gives me a good handle on what to really expect after expenses.
PS–I like your podcast too. Keep up the good work.
Hi Paula,
I really enjoy reading your blog. It has been an inspiration and guidance for those of us looking for to develop passive income from real estate. I have a suggestion for your web page: it would be great if you could include an option for those of us already subscribed such as “Already a fan” in the pop up to subscribe. “Nah I’m fine” does not really describe us. Thank you and keep up the great work!!!
Putting together a system of renovation is incredibly smart. Having an income stream from real estate investing has got to be one of the best value added operations I’ve ever heard of. Thank you for putting the time into writing this detailed operation of what you do.
I am a new reader and this is a great article. Would love to see the finished product.
What about backsplash, faucet, and sink? Would love your short input on why you buy a certain product (if there is any practical/functional reason). In addition, would love your input on the appliances you buy for optimal returns rather than diminished returns. Stainless appliances vs appliances on sale, etc. Thank you in advance.
Paula,
The Wood Plank Porcelain Tile looks great in photos, but I would imagine it has the feel of ceramic under foot. Tenants / occupants in most markets (including Atlanta) are looking for carpet throughout the home and have somewhat come to accept LVP flooring as well, but I’m curious as to the marketability with this ceramic product. Do you get feedback or objections from the prospective tenants? How many times have you marketed and rented a property that has this Wood Plank Porcelain Tile installed throughout? What is the average vacancy time?
Interesting you think so. I’m in Philadelphia, and nobody here wants carpet. It’s all about wood or wood-like flooring. Carpet is viewed as old-fashioned and dirty.
Nice one! but if you plan to invest in real estate sooner, careful not to overextend in terms of buying property. Real estate investing is very exciting, and sometimes it can get the better of you. You may bite off more than you can fiscally chew. Know your numbers and your budgets and stick with them. Even if it seems like an easy flip, don’t go past your budget!
I just found your blog and you’ve given me a lot of inspiration to get started on the rental properties, what you’ve done is very impressive. I also live in Atlanta and I’m curious if most of your properties are inside or outside the perimeter? I’ve found that anything inside the perimeter takes a higher investment
Thanks for sharing your rental income reports. In the interest of keeping better records, I’ve decided to file monthly reports for my properties as well. It easy to own property, but with all the different bills and expenses sometimes the exact profit become less clear. Thanks for the inspiration.
This article is awesome. As a numbers person I can appreciate the simplistic layout of the article. I enjoyed the part about your income for the given months. You may be making $5,000 but work less than 10 hours to achieve that money.
I agree that many of the gurus out there promise making thousands of dollars. While it is attainable, it is not very common for the average investor. Also it takes a great deal of time to get that much income in a month.
I too just started a website about my REI journey and DIY projects around my home and investment properties!
I am so glad I subscribed. This information is great because I am in the process of updating my townhouse. I will renovate my kitchen soon and this info helps!
Just stumbled across this. Right up my alley. LOVE. LOVE. LOVE.
Thank you!
Long time follower, first time commentator. Your drive is nothing short of contagious.
Your lengthy posts, filled with details and numbers fascinate me. So much so that, after years of “thinking about it”, I finally started my own blog dealing with just hard core numbers, mostly inspired by your rental cash flow series.
Did not see the pictures of the finished kitchen, was the work still in progress when you published this post?
Hey Paula – this is great! I did some light renovation work on my first apartment but I wish I would’ve read this first to do it all right especially on the flooring. You guys are probably a couple years ahead of me but it’s great to see where I could be if I stick to my plan.
Now I’m trying to figure out why I never bought any of my home repair materials from Amazon…great tips!
I’ve just discovered your terrific blog! We are in the process of finishing up a major renovation on our 5th rent house (which had been vacant for 10 years and was a wreck). I saved a lot by buying materials (stove, vent hood, ceiling fans, vanities, lighting and plumbing fixtures) on CraigsList. It’s time consuming but a big money saver, and many of the items we bought were brand new. We even got a bathtub and a vanity for free. We put vinyl plank flooring (click-style) in the bathrooms and pantry – it looks like weathered barn wood. I love your tip about granite tile – will definitely look into that for our next kitchen remodel. We opted to just paint the kitchen cabinets in this house, but plan to replace the cabinet doors later, which is much cheaper than replacing the boxes. I have a question about IKEA cabinets – I have heard that they are not very durable. Anyone have experience with that?
Hi Paula! This is such a helpful post, thank you! I am starting to remodel one of my rentals. I was just curious, did you have to use grout with your porcelain tiles?
Hi Paula,
I am new to your blog and I would like to thank you for your high quality posts. I did like your description of goal keeping so far very much. I do have a house within a growing german city including 2 flats to rent and I have another one in spain which I rent too. I am new to AirBnb and use a different site specialized for vacation homes . However, the pricing of houses seems ridicular low in the US. Do you really buy flats for about 35k$ and you get 100$ per night for it on portals such as AirBnb? This would mean that the flat is in a region where tourists want to go? In europe these regions are normally quite expensive.
This is amazing. I do estimate to get about 80-100$ with 2/3 occupation for the smallest of my flats. The price for it is 200k$. At the moment it is rented permanently. I do get 1000$ a month. So the rendite is 6%, which is considered to be very good. If I would get lets say 100$ per night by an occupation of 244 days the rendite would be 12,2%. This would be awesome . But I would need to pay costs for electricity, internet gas in the second case about 200$ per month (2400$ per year). So the rendite is still 11%. And if I consider costs for cleaning of about 20$ I stil have 9,8%. So it should be 10% rendite which is anyway quite good.
However, my team renovates units much cheaper than yours. I did pay in total 8000$ for a nice bath. Water, used water, electricity and all appliances are new including italian tiles. The Ikea kitchen is good enough. I also use these on my flats. MDF is a solid material. I do a lot of work myself to get the whole business running smoothly, but in your case I would outsource as much as possible as well. The focus should be to get more of these little pricy units, where you can expect this income.
Hi Puala,
Great article!
I really like the wood plank tiles pictured in the article. I clicked on the Flour & Decor link you provided browsed around, but I don’t see a style that matches your picture. Can you tell me what the style it is? Or the Floor & Decor SKU #.
Thank you! Keep up the great work!
Hi Paula,
You stated “For example, we’ve started using the same paint color on every property.” What colors do you like to use?
JB
Hi Jonathon – Paula goes with neutral colors. Beige for interior, ultra pure white for trim color, and flat white ceiling paint. She recommends Behr Premium Plus from Home Depot and mid-grade paints from Sherwin Williams. Hope that helps!
This is such a well written and informative article! May I ask how you went about finding a contractor that you trust, who you can work with from afar? Specific questions to ask a person you’re thinking of hiring?
Thank you!
Thank you for sharing your blue print. I’m renovating a 2 family and this was the cheat sheet I needed.
Paula,
I’ve been Googling “landlord reno tips” all day, and this is the most practical and specific article I’ve come across. Thanks for posting. I’m in Atlanta, so if there are any contractors, PMs, or other investment team members here who you would like to recommend, I’d be very interested in checking them out and potentially sending them some business.
Also, you mentioned briefly that this article leaves out wiring, plumbing, HVAC, roofing, and so on. I just finished reading one of Mike Holmes’ books, and his “gut everything and make it right” approach, while educational, encourages a lot of big spending that won’t cashflow. The better question for investors is “how much is enough?” I bet you have some “lessons learned” on the subject, and it would make a great article!
Cheers,
Dan