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In this episode, you’ll discover:

  • 7 things amateur investors waste money on when rehabbing properties. (1:47)
  • The “rehab checklist” that makes buyers open their wallet at the first viewing. (2:52)
  • How to tank the value of a $5M mansion—and how to keep it up. (4:10)
  • Why tenants hate the upgrades you pay good money for. (7:05)
  • One question to ask before any rehab–your answer can make the difference between losing or making money on the deal. (8:08)

Hey! Do you want to do a deal? Need my help with something? No cash to make an offer? Send me a quick text at 440-389-3883 and we’ll work together to get you the deal.

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Welcome to Cleveland real estate investor. On this podcast, you'll hear about every aspect of the real estate investment business. You will talk to your rockstar investors about their businesses, how they built them, where they came from, and where they're going. Who am I? I'm Joe Lieber and I've made millions of dollars from the real estate investment business over the last 20 years. If you're ready to hear the good and bad from a guy who's learned this business from the school of hard knocks and get educated by some bad ass entrepreneurs, then put your helmet on, strap on your chin strap. Let's ride.

(00:35): Hey, what's up, buddy? Thanks for tuning in to another episode of Cleveland real estate investor. So today we're going to talk about a rehab versus a rent ready house. There's a difference. There's a big difference. And some people take things too far. They take on way too far. They're doing rehabs for houses that are being rented. What's the difference? What are we talking about? So let's just dive right into this. Today. A rehab is a home where you're hitting a lot of the major stuff, right? Because this house would probably be something you're going to sell for retail. So what would a first time home buyer or a prospective owner occupant purchaser look for? I've been selling real estate for 20 years as a broker, so I work with a lot of first time home buyers and I get to see exactly what they want, what they're looking for.

(01:22): So you have a couple buying, maybe, let's say they're buying their first house and I don't have a whole lot of money down and the husbands and wives, they look at things differently, right? Guys look at things one way. Women look at them in a completely another way. Women are interested mostly in nice kitchens and bathrooms and the men seem to be looking at the things that are expensive. The things that are hard to do that I like to call or we'd like to call on this business cap. Ex capital expenditure means things like roof siding, windows, furnaces, ACS, hot water tanks, electrical boxes. These are the things that I see guys look at when they come into these properties. That's their main concern because those things can get expensive. They can get really expensive. And if you're doing a rehab and selling a home for retail to a first time home buyer, gosh darn it, you better have at least a lion's share of those things done.

(02:16): Women on the other hand, they're coming in and, and don't get wrong, they notice this stuff, but they're more focused on the kitchen isn't nice. Is it pretty? Does it have granite countertops? Does it have appliances? Yeah, appliance packages for a first time home buyer. Expensive. A couple of grand might not seem like a lot, but it is a lot. And they look at this stuff and they want it and if he had that stuff in there, awesome. But they want to make sure the floor's nice and the doors are all open and close. Nice and a nice faucet. And the bathrooms are clean and bright and that's what gets them excited. And that's cool. And if you're selling a home, you should do those things. You should make sure it's freshly painted. You should make sure that a nice tile floors are down, not like a vinyl floor.

(02:58): I mean step it up. Maybe it's a tile floor, maybe it's vinyl plank flooring, you know, something just really nice and looks good. Those are things that need to be done. Okay, so what's the difference? Now I'm seeing people who are doing these things and then they're putting tenants in the houses. Now we've all rented things, right? We've even rented a hotel room. You're probably a little less careful in a hotel room, right, than you are your home you own. So there's a difference. I mean they're just, the care level is probably not going to be as high if you're renting it versus if you own it. So do you want to do all those things? Do you want to dial in a nice tile floor and granite countertops and the slow closing drawers if you're going to be renting the property out? Probably not.

(03:41): And honestly their expectation is probably not that either. They're not in there looking for all those luxury upgrades. Now if you're doing class a type Reynolds high end, okay. Probably a little bit of a different story. Although I will say a couple of eight friends and I recently rented a, I mean it's a mansion, a mansion. It was a 15,000 square foot home in Orlando, Florida for an all guys golf trip. Awesome. Right. I mean this house was laid out, even had a bowling alley inside of it. A two lane bowling alley, right. Arcade pool. It was insane. You know, I was looking at, I was looking around at comps while I was on this guy's strip and this is like a $5 million home. It was awesome. What, I'll tell you what, to be totally honest, the house wasn't crisp. If I owned that home and I was doing an Airbnb or renting it out the weeks I wasn't there and that was my $5 million home, I would be freaking pissed.

(04:39): It was, you could tell there were some wear and tear to say the least. And that's being nice about it. So even that guy who might've upgraded a lot of things because the caliber of the home, not just the size but yet upgraded a lot of fixtures and you know to make the home nice. Oh I'd be super upset. So you really can't do some of these things cause they're going to take a beating. I mean for grant out loud yet eight guys in that house having a big guy time if you know what I mean. And probably a family cone right behind us. I mean a house that size, you'd probably have three or four families renting something like that out for the week and you got kids in there terrorizing the place. So there's a difference between rent ready in rehab and when you're doing rent ready to lower your expectations, it might not be something that you would person live with.

(05:26): But for someone renting, it's fine. A vinyl floor is fine for Mica countertops, they're fine. Maybe a little stain in the carpet. You can keep that, clean it, get it clean. You'll be fine. A couple of scuffs in the wall, no ceiling fans. That's okay. You don't necessarily need ceiling fans to just the outlet with a switch, it will be more than sufficient in some places. You know, air conditioning is not even a requirement here in our area in Cleveland, it's unusual to see a lot of homes with central air. You know it's cold most of the time. As I like to say, it's even cold in July. It is for you. Clevelanders are listening to this. You know what I'm talking about? Those July nights when it's a 90 during the day, but you have a light jacket on at night. What the heck, man? So you know, it's not always like that, right?

(06:12): So getting the house rent ready, not going all out, just making it habitable, making it nice where people want to live, they feel proud to come there. It's safe. That's what you really want to do. If you're going to be renting property, you know, not going to the extreme, but making it nice. Also, I have to say that I had to do a lot of section eight rentals. I love section eight rentals. That tenant base. They don't even want carpet in their homes. They prefer either a hardwood floor, vinyl flooring. They prefer that low pile carpet. Like you might walk through Macy's, you know you're going through the clothing department. It's that real low pile, like a commercial grade carpet. They prefer to do that so they can just kind of sweep up my tongue crazy. But not everybody has a vacuum cleaner and wants to sit there and vacuum their floors once a week or whatever.

(07:03): So they prefer no carpet or like a low pile carpet where they can just sweep up and you might think, Oh I'm doing them. Such a nice favor. I'm going to put in top of the line plush carpet in there. And a lot of people don't even want it there. Just too much maintenance in it. They like to wear their shoes in their home in some places, which I can never get used to by the way. And our market, we don't wear shoes in our house now. Yes, we have snow and different things that that natural. But my wife will yell at me if I have, Ooh, if I walked in the house with shoes on, she's like, I don't know what you're in. All you are to stand around. And she's right though. Really no matter where you live, nobody wants to come with their bare feet an hour later and you're walking through there with Oh being a some urinal and Oh gosh, right.

(07:46): So some people do want to wear their shoes in their house regardless as to what I think. And they don't want carpet and trekking in snow, mud. Nice. And it's easier for them. So you just have to get your mind around rent ready, verse rehab ready. And we do a lot of rehabs it, we lay them out and they're very nice. But it's a different base, right? We're looking for people who are looking to buy the homes and not rent them. So you have to know going in, am I going to rehab this house to sell? Am I rehabbing it to rent? And there's a massive difference there. So hopefully this helped a little bit. Thanks for tuning into another episode and we'll catch you on the next one.

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