Since when can a problem make you money? Well, ever since real estate existed. You can make money with a rental property in many ways, but one of the fastest ways to build value is to rehab a property. You don’t need a major rehab, it can be something quick. Here are 8 “problems” that can help you make money with a rental property:
1. Bad Smells
If a house has a bad smell, it will scare away 95% of your competition. There are a select few out there who love bad smells, because while most people smell urine, or rotten food, or mildew, some people smell money.
Most of the time, bad smells are a simple fix. You can get a great deal because of the bad smell, and then fix it quick and easy, and either rent it out or sell it for much higher than you bought it for.
Here are 6 ways to eliminate bad smells:
- Replace the Carpet
- Mop the Floor
- Prime the Floors
- Wash the Walls
- Prime/Paint the Ceiling
1A. Replace the Carpet
It’s pretty common for things to get stained into the carpet, things can sour, things can get trapped, all sorts of stuff goes on in the carpet.
Chances are, you were probably going to replace the carpet anyways, unless you were searching for a turnkey home. But since you’re here to make money, replacing the carpet can take 90% of the smell away. Your problem could be solved for less than $100. But if it’s not, you can move on to the next option.
2A. Mop the Floor
Mop the floor with a mixture of bleach and water. Bleach is extremely powerful when it comes to taking away smells, and there is a good chance that the bleach will overpower the smell. Make sure you allow the floor to air out for a few hours so that you can make sure that the smell is gone.
If the smell persists, move on to the next option.
You should be cleaning before you put a tenant in anyways, so either clean the house or hire a professional to clean it for you. Sometimes, the bad smell is something that rotted and was left somewhere. Oftentimes, neglect is all that caused the bad smell, and some TLC can fix the problem real quick.
4A. Prime the Floors
You can buy some Kilz Oil-Based Primer and a paint roller and pour it onto the floor. It is extremely strong, and you may have to wear a respirator when using it, but it is bound to get the smell out of the floor if you know that that’s where the smell is coming from.
Brandon Turner, the VP of Growth for BiggerPockets, said that when he used the primer, he passed out because he didn’t wear a respirator. I would recommend wearing one.
5A. Wash the Walls
If it’s more of a stale smell, oftentimes washing the walls will eliminate it. This is just good old scrubbing with soap and water, sometimes you can even see the residue coming off of the walls.
6A. Prime/Paint the Property
If worst comes to worst, you can hire someone to spray the entire inside of the property with the Kilz Oil-Based Primer, it can be done with about $200 of primer and a couple days labor.
These 6 steps have solved almost every smell problem there was with a new rental property. If it didn’t, then it may be coming from a busted sewer line or something bigger like that. If you are worried that it may be that, then get a professional inspector, because these problems can burn a hole in your pockets.
2. Hidden Third Bedroom
3 bedroom houses are much more desirable than those with 2 bedrooms. But sometimes, you will find a 2 bedroom house with a large laundry room, or storage room, that could be inexpensively converted to a third bedroom. This could increase your property value tens of thousands of dollars!
Keep a eye out for “bonus rooms” “huge bedrooms” and “game rooms”. These can be converted into extra bedrooms for a nice gain in equity.
3. Ugly Kitchens
Kitchens are a make-or-break for a lot of tenants, and probably has more pull than any other room. An outdated kitchen sells for cheap, and you can fix it up cheaper than you think.
You don’t need new cabinets unless they’re damaged. You can buy a refinishing kit for about $100 and make them look like new cabinets. You can replace the countertop with whatever matches the neighborhood, maybe take a wall out and make it open concept, there are so many ways to fix a kitchen inexpensively.
You don’t need to go overboard with nice looking things, it’s a rental property, not a mansion.
4. Bad Roof
If a house has a bad roof, you just lost 90% of your competition. This is great because you can try and negotiate a much better deal now, because roofs are intimidating to most homebuyers and investors.
Roofs can be expensive, but they can be quick. The large contractors may ask $15,000-$20,000 for a roof, but you can find smaller contractors who will give you similar quality for 1/3 of the price. You shouldn’t have to pay more than $6,000-$8,000 for a new roof, and that will be a problem you won’t have to worry about for 20+ years!
So a bad roof = better deal, less headache, less CapEx
Mold scares most buyers off. The moment they hear the word “mold”, they think it is a drastic fix that will be hard to detect.
Mold is not a random occurrence, it happens for a reason. When moisture builds up in a specific spot, it bring in mold. Eliminate the moisture, and you eliminate the mold!
Different circumstances require different procedures, but here are some basic ones: If there is mold in the bathroom and it doesn’t have a window or vent, then install a vent. The mold should go away, because without ventilation, the moisture has nowhere to go. Mold in the ceiling? There is probably a roof leak right over that spot, or there is no insulation.
There is always an answer to why there is mold, so while other investors fear mold, others don’t hear mold. They hear money.
6. Compartmentalized Configuration
Rooms used to be designed separate from each other, so in older houses, you tend to see more compartmentalized rooms. But obviously, the gig nowadays is open-concept. People want to be able to cook in the kitchen and still interact with people in the living room.
When properties are compartmentalized, they sell for cheaper. Knock out a wall or two, and the value goes up dramatically. Open-concept kitchen is worth more than a closed kitchen.
Grass that is 2-feet tall, weeds sprawling everywhere, overgrown bushes, vines out of control, these are major turn-offs for families looking for a place to live or rent. But to most investors, this is an incredible attraction for multiple reasons!
- Neglected landscaping means the owner probably doesn’t care about the property anymore, and would be willing to let it go for a greatly discounted price
- The lack of curb appeal turns a lot of potential buyers off, eliminating some of the competition
- Neglected landscaping is a cheap fix.
There are a lot more hoarders than you think there are, and when a property is left with a bunch of junk in it, it can be a turn off for buyers who don’t want to deal with a clean-out process. This is a great opportunity for you to snag a deal from a motivated seller.
Buy the property for a deal, clean the place out, give it a little bit of a refresher, and get great cash flow from junk-filled properties!
PLUS: 3 Problems to AVOID When Looking for a Rental Property
The 8 problems above can be fixed relatively in expensively compared to the great discounts they can render you in the buying process, but there are other problems that can cause amazing headaches, leave you in the hole, and wishing you could just get rid of the property.
Here are 3 of those problems.
1. Bad Neighborhood
You can fix a property, but you can’t do much to fix a neighborhood without buying it outright.
You can get cheap properties in a bad neighborhood,but that doesn’t necessarily make it a good deal. Bad neighborhoods cause high vacancy rates, shorter terms, more expensive upkeep and maintenance, late rent, and more evictions.
You can end up losing money, and that happens more often than not. The value of the property may actually decrease overtime, because of the bad area. The area could get better, sure, but it could also get worse. Do you due diligence and make sure you are investing in a good neighborhood.
2. Foundation Problems
Some people specialize in properties with foundation issues because they can snag a great deal, but this is certainly not recommended for beginner or intermediate investors. If the foundation is having problems, it can quickly turn into a money pit that can sometimes eclipse six-figures.
Steer clear of properties with foundation problems unless you know what you’re doing.
3. Shared Driveway
Bet you’ve never heard this one before. What’s so bad about a shared driveway?
If you know the neighbor, nothing. But if the neighbor trashes his side of the driveway, like many people do, it can make the value of your property go down. This is actually a common occurrence with many shared driveways.
It is safe just to steer clear of the shared driveway and not have to worry about it.
8 “Problems” That Can Help You Make Money With a Rental Property
The information in this article was provided by Brandon Turner and his book, The Book on Rental Property Investing.
The Book on Rental Property Investing is considered the greatest overall guide to investing in real estate by many sources. It covers every part of real estate investing, from financing, to finding a deal, to analyzing, to managing, to negotiation, to rehabbing, and more. There is a chapter for everything, and a lot of investors credit their success to this book.
Brandon Turner, investor, podcaster, and VP of Growth for BiggerPockets, has been investing in real estate for 13 years, and has amassed an overwhelming 300 unit portfolio of cash-flowing rental properties. He spends his time on BiggerPockets, Youtube, and at meetings teaching people about real estate and how to become financially free.