Renovation Costs on an Investment Property

Should you spend money on renovating an investment property? That’s today’s video. Let’s dive in. Hey everybody, I’m Clayton Morris..


Should you spend money on
renovating an investment property? That’s today’s video. Let’s dive in. Hey everybody, I’m
Clayton Morris. I’m the Founder and
President of Morris Invest. I’m a longtime real
estate investor. And this whole
channel is devoted to helping you create
passive income, understanding the power
of rental real estate. And today, we’re going to talk
about, should you renovate, spend money on renovating
an investment property? The simple answer is
it depends, right? You don’t want to overspend. If you find a great
property and it looks like it’s
in fantastic shape and you get an inspection,
and you realize that all the mechanicals in the
property are in great shape, then you probably don’t need to. But if that’s not the
case, then you probably want to spend some money
to renovate that property. Now the properties
that I end up buying, I mostly pick them up
and through all manner of disrepair. They’re going to need a
whole makeover basically. And that’s fine because now I’m
adding value to that property. But maybe you don’t
have the cash on hand, and you can’t really
afford to do that. And that’s totally OK. But I want to give you
my philosophy on why it’s so important to make
sure that your property is in tip top shape and is going
to last you a number of years. The goal on every
property that I do is that I want it to be
maintenance-free and not have to have expenses
for 10 to 15 years. Now how do you get there? How do you stay maintenance-free
and expenses-free for that long? Well, you want to repair and
maintain the main mechanicals of a house. And what do I mean by that? Well, the main systems, the
main mechanicals, and there are a number of them. And I’ll go through
them here quickly. The roof, OK, if
I buy a property and it still has 22
years of life left on it, I’m not going to
replace that roof. That’s a waste of money. But if the roof
needs repairing, I’m putting a new 30-year
roof on that house. And it’s going to
last me a long time. The roof, you want to
make sure your roof is protecting your investment
and taken cared of. Number two, the windows, if
their old, broken windows, I will replace those windows
with new Pella windows or Anderson windows,
those vinyl white windows. Lock in the heat. Keep everything airtight. Really protects the
overall structure. So now I’ve got the roof. I’ve got the windows. What about the main
systems in the house? These, again, are
the things where you’re going to spend
money, but they’re the most important
factors in your property. A hot water heater, I’m
going to put a new hot water heater in it if it needs it. A new furnace, definitely
putting a new furnace into my property. There’s a reason that they come
with a 10-year manufacturer’s warranty. They’re going to last about 10
years, 10 to maybe 15 years. So you’re going to
want to plan for that. If you know it only has two
years of life left on it when you’re checking it
out, chances are you want to put
in a new furnace. Just get it off of your
plate and just do it. Your tenant will be happier. And you will be
happy knowing you don’t have to take care of this
for many, many years to come. What about the plumbing? On a lot of our
properties, if we want to replace the plumbing,
we’ll put in PEX plumbing through the whole property. So we’ll tear out old
galvanized pipe or PVC pipe and add that into
the property so that we know we have
that taken care of and protected for many,
many years to come. Electrical, yes, we will
update the electrical. If it’s that old knob and tube
wiring, we’ll update that. We’ll put in 200-amp electrical
panels in the property to protect the property. And that’s it. Those are our main
systems that we want to take care of in the house. So roof, windows, electrical,
plumbing, furnace, water heater, those
six main things we want to take care
of in the property. The other stuff is minimal
and less expensive. So paint, carpet, dry
wall, cabinets, flooring, that sort of stuff,
of course, we’re going to update that
when we’re doing a rehab. But where you really
want to make sure that your investment
is protected are in those mechanicals
that we talked about. Those main six areas
can really protect you for many, many years to come. So if you’re looking at
buying a rental property and you find one, and it
has four of the six things that are in great shape, great. You probably don’t need
to worry about those for a number of years. But if the roof needs fixing
and the furnace needs updating, do it. Don’t skimp. Get out there, put
the new furnace in, put the new roof on the
property, and that way you’ll have peace of mind. And you can reduce your
overall expenses for many years to come. I hope this was helpful. But that is why I would
renovate an investment property in those
key areas to make sure you’ve got a rock solid
investment for many years to come. We’d love to have you
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on the next video, everyone. In the meantime, get
out there, take action, and become a real
estate investor.

28 thoughts on “Renovation Costs on an Investment Property”

  1. can i buy a rental property in colorado for $15,000 and fix it up around $15,000 and ready for rental ROI @12% or more?

  2. Clayton, question here, let's say you are getting 700$ rent, 8400 gross income a year, after you get the 40% out, do you keep the other amount as your freedom number? Another question, is property management in that 40% or not?
    Sorry if the questions don't make sense Thanks for the videos man.

  3. Good afternoon noon Morris, how can I get a quicker response to my questions without contacting you publicly?, Morris what you have going on here seems like a sure thing, I would like to purchase more than one property at one time. Can you help me with a spread sheet to present to my local bank?

  4. lets say I have $20k saved and I'm pretty sure I can get a private lender or a loan for another $20-$30k. should I apply for the loan that way I won't have too many unknowns of when and how much I would have the money or should I get in contact with you guys first to see if you have anything for me and that way I can give the private lender details? or would you suggest I keep saving for another year to buy it cash?

  5. Do you pay cash for your rental propertiee?? If we had to use a loan to secure our first rental property, what would you suggest?? Thank you…

  6. Thank you so much. I'm a newbie and purchased a property in Newcastle, In. I will be starting the project soon, and this is extremely helpful. Now I just need a good contractor.

  7. Question: When you buy properties in othere states, do you try to keep your properties in the same city so you can use a resonably priced renovation team you've used before? It would seem if you had properties spread all over the place you'd have to break in a new team all the time.
    BTW, you do a great job making vids!
    Thanks

  8. So if you buying a house that gives a great roi but those major repairs will have to be dont in the next 2years for example, how do you calculate your capEx and how do you adjust your offer?

  9. Hi Clayton, If you have time, can you make a video on the pros and cons of buying an existing rehabed home for $40,000 versus buying a property at $10,000 and using $30,000 to rehab. Are there tax advantages? Why not just buy the rehabbed home instead of doing the rehab yourself? Thanks

  10. Hey Clayton, I'm seeing several videos popping up showing investor's not happy with your properties, showing significant repairs left to investor's to pay for, care to chime in on this? I don't want to make assumptions….

  11. What about air conditioning and heating? If it has window air conditioning is it worth it to put in central air and heat?

  12. Hey Morris, how do reno costs factor into roi? I am being offered an "easy reno" loan which will cover the cost of rehab. Not entirely sure how to factor this into roi. Any help would be appreciated. Thanks!

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