Best Countertops for Income Properties… and the granite tile controversy!

The countertop is one of the most important parts of the kitchen. There are a couple of different schools of thought when it comes to counters, particularly in income properties. Some say, “just use the cheapest material.” Others prefer a more durable material with a high up front cost.

Formica/ Laminate – Low Upfront Cost, Low Maintenance

Many landlords choose laminate countertops because they are the least expensive option with the lowest maintenance cost. You can get one like this
for less than $10 per sqft including all materials. With about a $300 install cost, you’re looking at an investment of just over $500 ($14.70 per sqft) for 34′ of countertop that can last for years.

Wood Counters – Low Upfront Cost, high maintenance cost!

At our old apartment, the landlords installed reasonably priced Ikea Butcher Block Countertop like this. After a couple of months of normal use, it was stained by some strawberries and had a burn mark from a hot pot. When we moved out, the wood counter was sanded and resealed.

34 sqft Ikea Birch Countertop – $338

Initial Install – $250

Sand and and apply multiple coats of sealant after each tenant ($150 per year x 10 Years) = $1500

Total for 10 year counter = $2088, or $61 per sqft!!!!

That calculation doesn’t account for time spent calling and scheduling contractors each year. Sure the wood was cheap initially, but high maintenance drives the total cost up astronomically. Unless you are doing the work yourself, it doesn’t make much sense to use wood countertop.

Granite Slab – High upfront cost, Low Maintenance

For the sake of brevity, I’m grouping all stone counters in the granite category.  Granite is the most expensive option on this list. It can take a beating, needs minimal maintenance and is arguably the best looking of all the countertops listed thus far. It can range from $30-$50/ sqft installed, which is about $1350 for 34 sqft. Installation is a breeze. Your contractor comes and measures the area. A few days later he comes back with your precut slabs and sets them on your cabinets.

Granite Tiles – Surprisingly High upfront cost, Low Maintenance

During my last reno, we were pretty much set on using Granite slab. While at “The Tile Shop” looking for backsplash ideas,  we noticed granite tiles for $16 per sqft! The salesman informed us that we would save about 60% using granite tiles instead of granite slab. The only con would be small grout lines between the large 2’x2′ tiles. 34 sqft of granite tile would cost just under $600! What’s not to like about that?!

But of course, if it seems too good to be true, it often is. I placed my order and was SHOCKED when my invoice was $1100 for just the tile, not counting the other installation materials needed (plywood, concrete backer board, grout) or labor, which would have driven the cost of the tiled counter way over that of Granite slab.

Why were the granite tiles so expensive? Three words… half bullnose edges. The edge pieces cost $30 per linear foot. I needed about 17′ of this edging.

When I told my contractor about the tile invoice, he called it “another trick of the salesman.” Needless to say, I immediately cancelled my order and ordered granite slab! The granite slab guys even threw in a free under-mount stainless steel sink with installation.

Recommendation

At this point in my landlord experience, with only two units, I’m all about granite slab … which is expensive, but durable, fairly easy to install, and gorgeous. If I find an even better option, I might change my opinion.

Now you may ask why not use laminate? It seems to be the best of both worlds for landlords… affordable and durable. I mean, these are just tenants right?

My biggest problem with laminate is that it screams “CHEAP RENO, CHEAP PROPERTY!” When a prospective tenant walks into our units, I want them to think “Wow, this place looks amazing, I would be proud to live here.” I want their walk-through to be an experience. I expect that some extra money up front money for granite will pay for itself with lowered vacancy rates and higher quality tenants. I want tenants to fight over my properties, I don’t want to beg them to move in. My strategy is “all-in” on granite slab for my higher end properties.

What kinds of counters do you use in your renovations? Why? Let us know in the comments!

NO Lease, NO Tenant!

By El Dueño

It took us about 8 weeks to find a qualified tenant for our income property. I originally didn’t think it would take more than a month. It was our first time searching for a tenant, and after some reflection we’ve identified the three factors that doubled our anticipated vacancy time:

1) The “new landlord” learning curve and poor marketing (most notably the rookie mistake of only “renewing” our CraigsList ad once a week instead of multiple times per week).

2) Having a rental unit that is priced on the higher end of the spectrum in our area (justified by amenities like all utilities included, washer/ dryer in unit, and many more)

3) Losing a week’s time (and several potential showings) because we fully committed to a tenant who had not signed his lease and eventually ended up canceling on us.

I’d like to delve into point 3. After two weeks of marketing and several showings, we found a great tenant that met our qualifications and passed our background check. We sent him an email stating that he was accepted, along with a copy of our lease and directions to pay the security deposit. We were excited to have him moving in, and were pleasantly surprised to have filled our unit in half the time we planned for!

The accepted applicant replied to our email immediately letting us know that he was happy to be moving in. We had a verbal commitment after the initial viewing, pending the results of our criminal history and credit check… and immediately halted our marketing efforts once those checks came back. At that point, we stopped replying to all new inquiries from prospective tenants and did not schedule any more apartment showings.

A few days passed and I followed up with the tenant by sending him a picture of the new vertical blinds I installed in the unit and reminded him to send his lease and deposit. Two days after that, the tenant sent us an email informing us that his orders had been changed (he was a member of the armed forces) and that he would not be relocating to our area after all, and apologizing for wasting our time.

We live in the DC metro area, and there is a large population of active military tenants. Knowing this, we included a clause in our lease stating that the lease could be broken due to a change of military orders. Regardless of whether or not the lease were signed, this tenant would have been able to escape the lease.

The problem wasn’t the gentleman’s orders changing; our issue and mistake was taking it for granted that we had a solid tenant based on just a verbal commitment. The applicant was unabashedly excited about the apartment after our showing and ready to commit to us immediately. That enthusiasm gave us a false sense of security. The proper move on our part would have been to continue to line up qualified tenants and show the unit until we had a signed lease in our possession.

We were crushed, but as new landlords this experience was priceless. We restarted and doubled our marketing effort. Within another few weeks we had multiple qualified tenants, who each passed our background check. The first to sign the lease got the apartment.

So for those of you who are just starting out, or who have been lucky enough not to have had any problems with your accepted applicants, do not count your eggs before they hatch, and do NOT consider your units rented until you have received both a signed lease and security deposit.

Have you ever experienced something like my situation above? How did you handle it? Any suggestions to avoid this problem? Let us know in the comments!

The book that kick-started my journey…

By El Dueño

In 2008, a good friend of mine lent me an amazing book, “Why We Want You to Be Rich” by Robert Kiyosaki and Donald Trump, and demanded that I read it immediately. The book was an easy read, and it introduced me to some important financial principles:

• Cash flow = Income – Expenses
• Earned income is money you are paid that is tied to your 9-5 job
• Passive income is money you make from your investments like rental income, dividend payments, and even interest from savings accounts
• Assets are things you own that make you money (investments), while Liabilities are things you own that cost you money (debt)

My life was forever changed. After a few chapters of reading, it was clear that everything I’d been taught throughout my life about money was wrong:

“Go to school, get a good job, and make a decent salary.”

“Use your money to buy awesome things, like houses, cars, flat-screen TVs, and eventually boats and vacation properties.”

“If you don’t have the cash on hand to buy those luxuries, no worries! Use credit cards, loans or mortgages to get them because you work hard and you deserve it!”

The book taught the exact opposite, and provided me with some strategies that I have now put into practice. Each of the ideas below will be covered in further detail in future posts:

• You should work a 9-5 job only as a tool to save enough capital to invest.
• Use your money to make MORE money by investing it; when you eventually have enough passive income you can then buy those luxuries you desire.
• Invest primarily in buy and hold real estate with positive Cash Flow. Despite periods of recession every 10-20 years, real estate has historically trended upward in value over time.
• Buy your investments low, and sell high. Upgrade to bigger properties with more units via 1031 exchange, to save your equity and profits from being taxed!
• In most cases, your personal residence (house/ condo) is not an investment; it’s actually your most expensive liability!
• To make your home less of a liability, you can rent a portion of your primary residence. The rental can be just a room or an entire level.
• Unless you own your own business, your job is never as secure as you think it is. As long as you rely on someone else to pay you a check every two weeks… you’re never truly free. Your company can fire you at a moment’s notice, and you better have a backup plan!

By the time I finished reading “Why We Want You to Be Rich”, I decided that I wanted to become a landlord and shape my own financial destiny, yet I understood that I still had much to learn before jumping into the real estate game. To this day, my thirst for property investing knowledge is unquenchable. I continue to read book-after-book about real estate investing (Note: full list to follow in a future post).

My next big step was writing my investment strategy out on paper, to give myself a set of time-sensitive goals to meet. After a few years spent getting my financial house in order and learning as much as I could about landlording, I bought my first property in 2011, and in early 2012 I became a landlord.

If not for this one book, today I would probably be tens of thousands of dollars in debt with no real goals other than working paycheck to paycheck to buy the latest iGadgets. Now my goal is to share what I’ve learned with everyone that will listen… friends, family, and even strangers because knowledge is power and knowledge is freedom!

What was your “AHA!” moment? What investing books have you read? Please share in the comments.