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Our Condo Investment

(Part Two of Renting Out a Condo)

By - November, 2012

In our first report on investing in a condo rental, we learned that rental rates asked are not the best indicator of what units will rent for. We also discovered that the financial situation of a complex can change quickly. In any case, it still looked like we would make a decent return on out condo investment, and we were ready to start fixing the place up.

Lesson: Handymen are optimists. We found the best handyman we have hired (and we've hired a few over the years). We are very happy with the work he has done. But the work that was supposed to take a "week to ten days" is at three weeks now. This should not be a surprise. Every handyman we have ever used is overly optimistic about the time frame for finishing a project as well as the actual hours he'll need for each part.

This is really our fault. We hadn't hired a handyman in a while, but we should have consulted with our past experience. People who really know how to get things done tend to think in terms of how long something "should" take, assuming the best. Perhaps you have to be an optimist to be a great problem solver, but with real estate there are always surprises that take time and money.

We will use this particular handyman again, but here is how we will do our figuring: If he says something will take "x" number of hours, we'll double that. If he says the whole project will be completed in "x" number of days, we will triple that. As for projected materials costs, we'll add at least 20% to his guesses and budget at least $1,000 for unexpected expenses, or much more on a bigger project.

Lesson: Listen to your intuition. The hole in the wall by the front door was not a problem of an old leak that was resolved long ago. Just as my wife suspected, there was still dampness in there. In fact, water dripped into the wall steadily (and right onto the light switch) when it rained. The wall had to be opened up, the inside bleached to kill or prevent mildew, and we had to call management to fix the roof.

Once the roof was tarred, which was fairly quickly (we have good management), we had to wait for a good downpour to be sure the leak was fixed. Fortunately it was, so after a few days of drying out the last of the dampness we had new drywall installed. We could have gone after the association to pay for the damage, since it was a matter of past negligence (there used to be bad management) that led to the leak, but the fix only required two panels of drywall and we were painting anyhow, so the expense was minimal--not enough to go to battle with our own condo association.

The leak in the air conditioning closet was not as easy to fix. It took two tries, and now, after the second attempt, we are waiting for the rain to test the repair before closing up that wall. The leak was through the conduit, dripping straight into 220-volt electrical box.

Lesson: Learn prices. We haven't had to shop for major appliances in years, so when the washer/dryer combo (one of those vertical units) started to spew water on the floor, we figure that the worst case scenario was $700 for a new one. After a $69 service call confirmed that the cost of repair would be too high to bother, we went shopping. The cheapest stacked washer and dryer we could find was almost $1,300. Maybe we'll budget more than $1,000 for unexpected expenses next time, even on a "small" project.

It's a good idea to know what things cost so you can more accurately figure what the project will cost before making an offer. But it's also important to know so you can tally up the possible surprises. At the moment the 40-year-old water heater is working perfectly in our rental condo, but we didn't think about the possible replacement cost prior to running all of our numbers and making an offer. We still have not looked into that yet, but we will. We have to be prepared for that eventuality.

It looks like we are a week away from finishing the job, and then we will hopefully find a renter for $1,000. There are now two condo units for rent in our little complex. One is asking $1,000 and the other dropped the rate to $950.

Continues with this page: Renting a Condo

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