This is part 2 of a 2 part series. Read on to learn in 9 steps how to rehab your trashed property in days. Or go back and start with part #1 “Worlds Worst Tenants & The 1 Secret To Making Money With Rental Property” to see how I got here.
I finished my lecture to about 40 engineering students and then changed out of my Khakis and hopped on a plane to Minnesota at 20 degrees in the winter. Less than 24 hours later I looked over my trashed rental property. Empty booze bottles, bongs, pipes, and rusty razor blades left in the sink. How am I the one doing rehab? Why do my deadbeat tenants get to rack up over $9,000 in damages on me and then just peace out? Ahh the hilarity of life.
The truth is that I am doing this rehab myself as a lesson. I could have just taken the loss but this way I will never forget the most important thing in making money on rental properties. The silver lining is that I am going to rehab this place in days and quickly be back to cash flow and back to my family several states away. Here’s how I do it in 9 simple steps. Start by taking a deep breath. Probably do this before you enter the place. It’s gonna smell pretty horrible in there…
Rehabbing Step #1 Prepare
Unlock the door and walk in (or just walk in if the door is entirely missing). Don’t stare too long at the destruction. It can feel overwhelming if you spend more than 20 minutes just dwelling on how bad your tenants screwed you. There is only one way to eat an elephant: one bite at a time. Place a lock box so that contractors can get access. Put it somewhere other than the front door. You don’t need to advertise to riffraff and would be squatters that it is vacant.
Rehabbing Step #2 Remove Garbage
Remove the garbage and all of the tenant stuff from the house. I like to hire this one out because it is low level manual labor and rarely worth my hourly rate to haul trash. Keep in mind that if you evicted the tenants, there is often local laws about how long you have to store their junk giving them a chance to retrieve personal property. Make sure you comply. You may be able to move it to the garage in order to start rehabbing ASAP.
Once the garbage is removed the house won’t stink so bad and can be aired out. Now you can better see the real condition of the unit. That fuzzy flooring you can now see is the carpet. If yours looks like mine, it is caked in an unknown mixture of greasy filth that cannot be shampooed out and must be replaced. If you can shampoo it out, hey call that a win! Another bite taken out of the elephant.
Rehabbing Step #3 Punch List & Shopping List
Start at the entry room making a punch list of everything that needs to be done in just this room. Create a second column of all supplies and tools you will need to complete that task. Move to the next room and do the same. Do this until you have gone through the whole home one room at a time. Include cleaning supplies, rags, etc on your list. You now have a sense of what you may want to hire out (plumber, electrician, flooring, paint). You also have a sense of what you need to repair yourself and a shopping list of everything you will need. This list is absolutely key. Without creating a punch list that includes a detailed shopping list, you will end up making a half dozen trips to home depot each day. You will then be hugely inefficient, and get really pissed off.
Rehabbing Step #4 Get Your Bids Going
What to do yourself
If you do not already have a rolodex of contractors start building one on this rehab. Call all your pros first to get bids. They will be busy if they are any good. They will need a few days to get the bids and then do the work. This will be your long lead item. Get the bids and decide who to hire and what to do yourself. Do not hire out an electrician if you are simply wiring a couple new fixtures for example. The overhead in getting a pro out there will cost more than the job and the pro will not be happy either. The most economical way to take care of one offs is to do them yourself. These may include stuff like:
- a hole or two in drywall
- wiring a couple boxes or fixtures
- putting in a couple new plumbing fixtures
- rebuilding a couple cabinet doors
- repairing a few missing or broken tiles
When To Hire A Pro
Sizable pro jobs sometimes actually save you money because a pro can do it right the first time, waste less material, knows the building codes, and is way way faster than you. If it would take a pro more than a half day it may be worth it to hire out. These may include stuff like:
- Extensive plumbing (new lines, leaks in walls, substantial sewer line issues)
- Electrical work (diagnosing weird electrical issues, new breaker boxes and lines, wiring a build out)
- All new kitchen cabinets (maybe design yourself from pre-fabs at home depot buy them and then pay an installer)
- Extensive painting (if you have a good budget option. I could go either way on this one).
- Carpeting
- Full area tile or plank jobs
Rehabbing Step #5 Go Shopping!
Buy everything from your list. This may take you a half day just shopping but it is totally worth it and will save time overall. If you included all of the size information on your shopping list you will be able to buy almost everything. You will also identify what you can’t easily buy. My advice is to buy it if you think you may need it. You can always do a run at the end of the job to return all your unused materials and get a refund. However, if you are missing one 8/32 machine screw, you may end up losing an hour coming back to get a 10 cent part. Since I was back in the midwest for this rahab, I got to listen to banjo music while buying all my supplies at Menards. Total bonus!
Rehabbing Day #1 Recap
In this rehab, I did steps #1-5 on day 1. It took me the full day and I was moving the whole time. By the end of the day, I had everything ready to start knocking it out on day 2. Potential contractors also all had the info needed to quote, the lock box code, and a timeframe for me.
Rehabbing Step #6 Work Fast
Start fresh on day 2 and fly through your punch list crossing off things as you go. You will knock out loads of tasks quickly. Some will get you stuck. Skip those and keep going down the list. Do one room at a time or group the tasks such as all knobs, all switchplates, all drywall patching, etc. Complete all outside stuff together. Do staining and drywall on day #2 so it can dry and you have time to do follow up if needed.
When tenants break the exhaust fan and then have 12 off lease adults showering every day this is what happens to your bathroom ceiling:
A 1:8 bleach to water mold treatment followed by a layer of anti-mold paint often does the trick. Make sure the mold is wet with the bleach mixture before you scrub it with a brush and for god’s sake wear a filter mask. I don’t claim to be a mold expert so here’s a resource.
When your tenant has a neglected toddler, that poor kid entertains herself by crawling around on the floor and removing all of the door stop springs from the wall. Then door slamming adults bash knobs into all the drywall like this:
With some drywall circle patches and some patching plaster it’s no big deal to fix these suckers.
Small tile areas can be fixed using a small can of premixed mortar:
How can I clean this place when there is nowhere to put the soap?!
Rehabbing Day #2 Recap
I can’t stress how important it is to never stop moving on day #2. If something is getting you stuck add it to a follow up list and keep going. Just to give a sense of it, on day 2, I completed the following:
- replaced all the blinds
- replaced the door stops
- fixed drywall holes
- treated the mold and painted
- installed smoke alarms (but keep covered until all work and painting is done)
- new stove drip pans
- fixed tile in the bathroom
- stained some cabinet doors
- replaced some plumbing fixtures
- fixed broken vent
- added storm door closers.
- fixed a rear door frame with “plastic wood”
- new toilet seat, towel rods, and TP holder
Rehabbing Day 3 Recap
On day 3, I returned with a pneumatic nail gun to fix cabinets and trim around the house. I completed the following and also did most of step 7 below.
- repaired trim throughout
- fixed and caulked kitchen cabinet backsplash plates / trim
- fixed cabinet doors
- replaced remaining plumbing fixtures
- replaced light fixtures
- fixed a railing
- replaced all missing switch and receptacle covers
- replaced lightbulbs
- rehung closet doors and replaced hardware
- replaced air exchanger covers
Rehabbing Step #7 Problem Areas & Follow Up Shopping
Make follow up runs to the store on the way to the property in mornings and in afternoons / evenings when you are spent and not much good working anymore. Return wrong or unused stuff. Do intricate work while unwinding watching tv with a beer in the evenings of days 1-3. Finish out your list. Part of step 7 is buying fixes to your problem areas that you put on hold in step 6. In some cases creativity may be needed. For example, my tenant decided to rage on my kitchen cabinets for some reason and broke most of the doors into many pieces. By the time I repaired and re-stained everything on day #3, I was a couple doors short. This cheap piece of stock oak trim around the opening under the kitchen sink and a Walmart curtain almost looks intentional:
Needs a scrub and layer of paint 
HG TV worthy?
Rehabbing Step #8 Appliances and Cleaning
For me flying in to repair a property, I left day #4 open as an overflow day. I ended up needing about half of it. Rather than buy new appliances, appliance recyclers and scratch and dent places often offer a good value option. However measure super carefully before hand and don’t be an idiot and have to drive all the way back and swap out a fridge / freezer for another one because you didn’t include the hinge in the height measurement (who would do something like that ahem):
I then had a bit of time left for some outside repairs and a last clean up. I got to admire all of my handy work while I swept dirt, rotten food, and more than one left behind body piercing ring into the dustpan. Thanks for the souvenir. One last trip to a dumpster and I was off to the airport.
Rehabbing Step #9 Schedule all Contractors
Now that bids are back, decide which contractors you want to use for remaining pro work. Decide what your hourly rate is worth and see what the bids come in at as compared to your estimated hours to do the same sub-jobs. For me this was hiring a very affordable pro painter, getting new carpeting throughout, and a final rent ready cleaning. Try to schedule contractors close together and get back to renting and cash flowing ASAP.
Rehabbing in 9 Steps, The Numbers:
We talked in part #1 of this example about how to create a profitable rental property and how I violated the most important thing to making money on a long term rental. I also covered what to look for to identify bad tenant situations before you show up because rent is a month past due only to find open doors and a house stripped of all appliances and copper pipe. We covered what recourse you have when your place is trashed as well. In this part #2, I described step by step how to go about rehabbing your trashed rental in 9 steps with loads of useful tips. My hands are now covered in little cuts and blisters from my 4 day rehab. However, I am back to profitability on the year for this property:
Rehabbing in 9 Steps Final Thoughts:
This property had a pretty tough year but it is offset by the multiple other properties in my rental portfolio. It is also worth noting that even in this tenant horror show, I was able to save about $4K in rehab costs and get back to 3% cap rate profitability by putting in 4 days of labor. I won’t forget this experience moving forward and the importance of selecting quality tenants. Do I still prefer direct property ownership to REITs? Believe it or not I do. I have 20-30% appreciation in this home and after this rehab, I was even able to cash flow it. I got here even despite this horror show and violating the most important thing in making money on rental property. Perhaps this story is also a good sobering reminder that with any investment you need to go in with eyes open and understanding what you may be in for in all scenarios, even the worst case.
What do you think of my 9 steps? Feel free to weigh in, ask questions, or add useful advice in the comments below. If you found this valuable, check out how real estate fits into my broader financial independence recipe here. What, you are still reading this? Then why not subscribe below to get articles from me every week?
