As a real estate investor who just bought a property that needs remodeling, you may want to know if gutting a house before renovating is worth it.
If you are buying a house that you can invest in, you are most likely to purchase one that you need to renovate. After all, the properties with the biggest income potential are those that require a bit (or a lot) of work to increase their value.
In this article, you will learn all about gut renovations: what it means, how much it will cost you, and if it is worth doing to your investment property. And should you decide to proceed with gutting a house and remodeling, you will also find a list of tools you need and step-by-step instructions on how to do it.
Related: Should You Invest in a Gutted House to Rent Out?
What Does Gutting a House Mean?
What does it mean to gut a house? To say that this phrase is similar to renovating or remodeling is simplifying it. To gut a house means to strip the entire interior of the home down to the studs. This involves removing the plumbing, heating, wall materials, cabinets, and fixtures, leaving you with just the skeletal foundation and the original floor plan of your home.
To gut a house means to demolish the interior, though it may also include doing work on the exterior as well. But you can leave certain parts like stairs, windows, and doors intact depending on their condition and your budget.
Meanwhile, renovating or remodeling means redecorating or refurbishing certain aspects of the property. Usually, you leave most of the layout in place, knocking down or building up a wall or two. You do a renovation or remodeling if you only want to change the aesthetics or functionality of a certain room.
When deciding whether or not to gut the house or just remodel, you need to consider the following:
- The condition of your property
- What you want to do with the house after completion (resell, Airbnb rental, or traditional rental)
- Your budget
What is the Cost?
According to HomeAdvisor, the average cost to gut a house can go from $3,000 to $6,000, but the actual cost can also get as high as $20,000. This amount depends on the size of the project and the cost of labor in your area. Remember, though, that these costs only account for stripping the property down to the studs. A complete rehab afterward will run you back another $75,000 to $150,000.
Here are some costs to expect when gutting an old house:
- Labor – $1 to $5 per square foot
- Dumping fees – $30 to $120 per ton
- Permits – $400 to $1,800
- Equipment – $300 to $1,000 per day
Most of the cost will go to labor, but it could be worth the expense if it means minimizing unnecessary damages to your home. If you want to save money, however, you can decide which parts of the demolition you can do and which ones will require professional help.
How Long It Takes to Gut a House
So how long does it take to gut a house? Depending on how many people are working with you, it may take as short as three days or as long as three months. And if you are doing it yourself, you will have to work for three months or longer.
If you have a strict timeline, it might be worth hiring a crew so you can finish the job quickly. You do not have to hire skilled workers to gut a house, so the labor costs for this part should be lower compared to when you start renovating.
Is It Worth It?
Houses built in the 1940s and later may be worth gutting and renovating. They are likely to have strong and structurally sound foundations and frames but would need some updating to meet the current building code.
To decide on whether gutting a house is worth it or not, you need to do a financial analysis. You can do this by adding the price you paid for on the property to the estimated cost of gutting and remodeling.
Next, analyze the neighborhood and the rental market in the area. You can use an online platform like Mashvisor’s Property Analysis Report to gather the data you need. Using this tool, you can find rental comps in the neighborhood and see the monthly cash flow, cash on cash returns, and ROI that these properties get.
Using these numbers, you can then calculate how long it will take for you to start earning a profit if you gut and renovate the house before renting it out.
Tools You Need
If you have decided to gut the house you are investing in, you first need to get your tools and equipment in order. You would not want to have to stop midway through the gut renovation just because you do not have a certain tool. Here is a list of tools and equipment that you will surely need:
- Rotating saw to cut into flooring or cut up a deck
- Reciprocating saw for cutting wood, nail-embedded wood, shingles, and even steel
- Power drill to unscrew built-ins while keeping the walls intact
- Breaker drill or air chisel for breaking hard surfaces
- Air cleaner to suck in airborne dust
- Hammer for tearing out lumber and other light materials
- Crowbar to pry out almost any kind of nailed wood, take up old tile and wood flooring, and pull out stubborn nails
- Utility knife or box cutter
- Demolition bars
- Dust mask
- Protective glasses
- Hard hat
- Steel-toe boots
- Stud finder
- Extension cords
- Portable lights
- Various tapes in different colors
- Drop cloths and plastic sheeting
- Carpet protector film, if you plan to keep the carpet
- Floor protection paper for hardwood and other flooring materials you are keeping intact
- Dumpster rental for throwing out materials
The Process in 9 Steps: From Preparation to Renovation
Aside from gathering the tools you need, you also have to make a plan for your project. Gut renovation is messy, technical, and dangerous, so writing down the steps you need to do will help you work efficiently. It is also important to check for legal requirements and to verify the structure before preparing your house for demolition.
#1: Plan Out Your Renovation.
If you have not done it yet, gather your tools and equipment (see the previous section for the list). Then, make a home remodeling checklist. Write down which rooms you are going to gut and renovate, in what order you will work on them, and what you need and want to do there. It is important to separate your needs and wants so you can prioritize what you really have to do and stay on your budget.
You will also have to decide which parts will stay and which ones you have to remove, and if you can reuse any of them. Next, schedule your demolition, and decide who will do the work–whether you are doing it yourself or hiring a contractor–and how many people you will need.
#2: Secure Needed Permits.
Check with the local government where the house is to see if you will need to secure a demolition permit. Smaller projects that only involve the interior may be exempt or could be part of the building permit, but it would be better to verify this than cause problems. Also, if you are gutting more than one structure, you will need to secure a permit for each.
#3: Get Insured.
You are about to undertake a big project, so the policy you currently have on the house may not be enough to cover possible damages that may occur. Because gut renovation involves leaving the home unoccupied for a period of time, you might need a builder’s risk policy or a vacant dwelling policy.
If you are doing the renovation yourself or have other people helping you, you will need insurance that would cover any injuries that might happen. And if you are hiring a contractor, verify that they have their own insurance that covers their work and staff.
Related: 10 Types of Insurance for Real Estate Investors
#4: Verify the Structure.
Inspect the walls and the foundation. Hire a plumber or electrician to find and mark where the plumbing lines, pipes, and wires run, so you will not hit them during demolition.
Also, know which walls are load-bearing and which ones are not. Only professionals should knock down load-bearing walls to avoid unnecessary damages. If you do not know how to identify this, consult an architect or engineer.
Check the fire regulations as well. Some walls serve as protection for your escape route in case of fire emergencies. Double-check if the city or county needs to approve your planned changes first.
#5: Prepare for Demolition.
You have to mark which materials will stay and which ones you need to remove. This can minimize confusion and mistakes while everyone is swinging their sledgehammers. You can do this by using different colored tapes or by writing words or symbols on them. Remember to communicate what the colors or symbols mean to the people who are helping you.
Next, protect the objects that you are keeping. Cover the doors and other openings with plastic sheeting to prevent dust from getting into other rooms. You can also use the same material to protect the windows and delicate items. As for flooring, use a carpet protector film for carpets and floor protection paper for other materials such as wood.
#6: Remove the Interior Walls.
You should know by now which of the walls are load-bearing. Otherwise, go back to step 4.
To remove an interior wall, you must do the following:
- Ensure that you have switched off the power in that room.
- Remove any wall hangings, pictures, or decorations.
- Remove the drywall with your gloved hands or a crowbar.
- Pull out any remaining screws and studs.
- Repeat with the remaining interior walls you want to remove.
#7: Install the Essentials.
Removing the interior walls is pretty much the actual gutting process. In this step, you need to refer to the list of what you want to do in your home (see step 1). These could include:
- Checking and fixing electricity and plumbing
- Rewiring new light fixtures
- Patching up dented walls
- Installing new cabinets
- Installing new flooring
- Painting the walls
#8: Clean Up.
To prevent waste from piling up, it is best to clean as you renovate each area. Have a dumpster rental in your driveway so you can throw away the debris as you go.
#9: Remodel Your Home.
Now that you have gutted your house and installed new essential materials, you can now put the finishing touches.
Safety Precautions to Keep in Mind
Keep yourself safe by wearing PPE, which includes a dust mask, protective eyewear, gloves, earplugs, and safety boots.
You need to know how to recognize lead-based paint and asbestos. In case you find either substance, contact a professional for them to remove it. Do not try to remove it yourself.
Turn off the utilities before you start the demolition. This is so you will be safe in case you hit a gas or water line. If you need electricity for your power tools, see if you can turn off the power in the room you are working in, and bring portable lights and extension cords that are plugged in from another room.
Lastly, have a first-aid kit handy to treat minor scrapes and cuts. And set up an eyewash station especially if you are dealing with a lot of dust and particulate matter.
Gut Renovations Can Help You Earn Big
Even though gutting a house costs a lot of money and requires a lot of time and work, it might be worth doing if it will lead to you charging a higher price or rental fee. But first, you have to do a financial analysis to estimate the profits you can expect with a gutted and remodeled home.
Whether you need to analyze your investment potential or determine the best rental strategy, you can use Mashvisor as your research tool to make smart decisions. Start out your 7-day free trial with Mashvisor now.