The secret to successful real estate flipping is knowing which improvements attract buyers and enhance the value of the home.
Here are some of the win-win improvements that make buyers and investors both happy.
1. Minimize Costs By Choosing Wisely
The bones of the home, i.e. the basic framework and layout, determine the size of the rehab budget. Jonathan Faccone, Founder, Halo Homebuyers LLC, has this sage advice for flippers: “When choosing a property, look for houses that can be improved without being reconfigured.” That’s particularly true if you want a house with an open concept, or if you envision adding value by adding a bedroom or bath.
Simply put: Painting walls is cheap. Moving walls is another story. If the old adage “you make your money on the buy” is true, then finding a floorplan that works as-is yet needs some love and attention is critical.
2. Cost-Efficient Kitchen Remodeling
A nice, remodeled kitchen is a huge draw for potential buyers. One caveat: It’s easy to go overboard. If you gut an entire kitchen, a mid-range remodel can easily run up to $60,000 — and net you only a fraction of that when the time comes to sell.
It pays to make your kitchen shine when you do it cost effectively:
- Sand and paint cabinets instead of replacing them.
- If paint isn’t enough, try replacing the doors instead of demoing the cabinets
- Instead of a $4,000 stainless fridge, find a tasteful one on sale for $1,000.
Remember: Your hard money loan is generally limited up to 70% of a home’s after-repair value. Choose the remodel projects wisely.
3. Add a Bathroom
This is sound advice in older homes that may have only one bath. The presence of a second bathroom can yield you twice the cost that you put into it, provided you spend wisely. A few bits of advice:
- Choose the location carefully. Find a place that makes sense and requires minimal disruption to existing walls.
- A half-bath can be done in as little as 18 square feet or with a shower - 30 square feet. With a full tub, the space would require 35 square feet. Go with what the space allows; don’t try to crowd a full bath into a tiny space.
4. Make Use of Wasted Space
A home’s square footage figures heavily into its eventual list price. By converting a basement or attic into an extra room or useable space, you can increase both the value and appeal of a property. Basements are ideal for game rooms, laundry rooms, extra bathrooms and storage areas. Attics are ideal for game rooms, children’s bedrooms and home offices.
5. Extreme Cleaning
Not every investment property improvement necessitates expensive construction. When potential buyers see the house, the first impression really matters! Power washing a garage floor, driveway or dated bricks can take decades off their appearance. As for neglected areas like garage or basement walls, a fresh coat of paint may be all that’s needed. Steam cleaning the carpets and polishing old hardwood floors also helps make a strong first impression.
6. Outdoor Spaces
According to Tonya Bruin of To-Do Done Renovations, “patio stones or a custom deck can have a 60-75% return on your investment.” The ultimate value of an outdoor space varies greatly depending on your location. In warmer climates where outdoor living spaces are used year-round, an outdoor kitchen can bring in a 100% to 200% ROI. But in areas like northern Minnesota, that money might be better spent indoors.
7. Invest in Curb Appeal
Robert Taylor, Owner of The Real Estate Solutions Guy, stresses the importance of curb appeal in selling a home. Replacing the garage door and front door are relatively inexpensive, yet nevertheless can give buyers that “wow” feeling while giving you a 90% dollar for dollar return. Kuba Fietkiewicz, Founder of REIkit.com House Flipping Software, adds that “replacing worn or damaged vinyl siding is likely to recoup most of your costs while greatly enhancing the rent or sales appeal of the home.”
8. Improvements To Avoid
While the improvements listed above can bring a substantial return, other improvements will typically negate returns — and could even hinder your efforts to sell the property. Among them:
- Swimming pools
- Luxury baths and kitchens
- Wall-to-wall carpeting
- High-end landscaping
A FINAL PIECE OF ADVICE: START WITH AN ACCURATE APPRAISAL
Always keep a running tab of every repair and upgrade on your list to stay on budget and on track. Get organized using with our free, handy Flipper’s Ultimate Appraisal Checklist.