2020 – 2021 were big years at our Union Hill property, mostly due to COVID. It was a forcing function – we spent much of our time at that triplex since we could not travel. And gaining income on these apartments mean that I can finally expense and amortize all of the costs over the years (yay!). So if you’ve ever wondering how much it is to remodel a triplex, here is a wrap up of all the expenses incurred at Union Hill, and what I think about them.
I’ll preface that this story as a cautionary tale – we thought we’d be renting this property in 2017 with a total investment of $40,000. But we took on too much scope and did not have a solid plan to execute, and those months stretched into years. There was also a lot going on in our personal lives – a few deaths, a baby, cancer, and a global pandemic.
2017
After a long search, we purchased the triplex in March of 2017. The day before we closed, my husband got laid off. The week after we closed, we got engaged. There were tenants in the property at purchase, so we were unable to start work until May. My husband spent much of 2017 at the property, and looking back, we got a ton of stuff done. We also took on way more than we expected and blew through our budget that first year. If we had not got so burnt out, we probably could have rented at least one apartment that year.
- Lower unit: New floor throughout, paint, new tile and vanity in bath, new lights, tile backsplash in kitchen. $14,652
- Middle unit: New floor throughout, paint, remove wall in kitchen, completely gut and replace kitchen, new windows. $41,739
- Upper unit: Gut to studs, raise ceilings, move hallway, new floor, new drywall, new ceiling, new kitchen, new bath. $46,956
Expense total: $103,347
Income total: $0
2018
In 2018, we just needed a break. The commute by ferry was exhausting us, as was the nonstop stream of projects. We took on a few projects closer to home, then a few surprises hit:
- We decided to sell a duplex my husband shared with his cousins in Santa Barbara. It was too expensive to maintain, and the ever encroaching fires made us nervous. My husband went there for a week to prep it for sale.
- My husband’s step-father unexpectedly passed. We now had two empty houses in Vallejo, so we had to build a plan to update and rent one of them.
- I got pregnant!
We started to gain momentum towards the end of the year, and I did manage to hire out some larger tasks for the middle unit. We finished some electrical work and had fire-grade ceiling installed, which we needed for a certificate of occupancy.
- Lower: drywall to entry. $233
- Middle: New ceilings, electrical, some drywall, deck repair, misc permits. $12,505
- Upper: Electrical work, deck repair. $3,594
Expense total: $16,332
Income: $0
2019
The year started off with more surprises. My father got really sick, and between his illness and my pregnancy, not much got done in Bremerton. No regrets there. We did do a few things to inch us towards occupancy, like install and connect stove vents.
- Lower: Electrical, exterior work $1,187
- Middle: exterior work $340
- Upper: Painting, new refrigerator, exterior work $2,035
Expense total: $3,562
Income: $0
2020
My husband got sick at the start of the year, then the pandemic hit. This project was actually an outlet to help me feel like I had control over something. At this point, the lower and upper apartments were closest to completion, so we focused our time there. Our last task to get the certificate of occupancy was to install a metal grate above the stove, which was surprisingly hard to find! Most of our final costs were for final electrical, some plumbing work for code, and cleaning before listing. We listed two of the apartments in August! They were rented by the fall.
- Lower: paint touch ups, cleaning $879
- Middle: Electrical $1,248
- Upper: Electrical, vent work, cleaning $4,300
Expense total: $6,427
Income: $11,600
2021
Once we rented the upper units, we made a commitment to finish the middle unit and rent in March. That would allow us to take a few months break, then start back up in earnest in November or December. We pushed our timeline back a bit when both West Seattle units opened up, but after a busy spring, we listed in June. I will say that we likely spent more than we planned since we upgraded the trim to restore historical details throughout the apartment. We have no regrets doing this work – we learned so much about carpentry and are really proud of the final product.
- Upper: None!
- Middle: Hang crown molding, finish closet, finish baseboards and door casings, add washer/dryer, plumbing and electrical repair. $16,073
- Lower: Repair drywall $0 (already had supplies)
Expense total: $16,072
Income: $38,800
Final Math
Our total investment was $145,741 over five years. That is an eye-popping number. Now let’s take a look at our cash on cash return. First, here is our monthly breakdown of income and expenses:
- Monthly rental income: $4250
- Mortgage and escrow: -$1677
- Vacancy fund: -$140
- Maintenance fund: -$200
- Capex: -$500
- Utilities: -$300 (water, sewer, garbage)
Net monthly income: $1432.38
Cash on Cash: ($1432.38*12)/$145,741 = 15.9%
16% is pretty respectable, given how much work and investment we put into this. What this number fails to show is the years of mortgage we paid on this property before we started seeing a return. That moment in 2020 when we finally did not have to pay out of pocket was such a relief! The upside of waiting so long to rent was that rents increased in that area. When we purchased the property, all three units earned $2500. The improvements we did, and the time it took to do them, increased the monthly rent. It also substantially increased the value of the property when it came time to refinance; the property now appraises for $100,000 more than the cost of the initial investment plus the remodeling cost
Lessons learned
- Have a very clear plan of the scope you are willing to take on… and stick to it.
- It pays to hire professionals. We did not in the beginning, and that’s why this took so long. We also had to redo work at times.
- Know the code of your area before starting work. There were times when I had to argue with the city inspector, and being able to cite city code saved us thousands.
