You’ve found your next real estate flip, secured your hard money loan, and closed on the property. Now it’s time to make a return on your investment.
The secret to successful real estate flipping is knowing which improvements not only attract buyers, but also drive up the value of the home so that you can realize a higher return on your investment.
Here are some of the win-win improvements that make both buyers and investors happy.
1.) Cost-Efficient Kitchen Remodeling
A nice, remodeled kitchen is a huge draw for potential buyers. But 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.
That being said, it pays to make your kitchen shine when you do it cost-efficiently:
- 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 to 70% of a home’s after repair value. Choose wisely.
2.) 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. With a shower, 30 square feet. With a full tub requires 35 square feet. Go with what the space allows; don’t try to crowd a full bath into a tiny space.
3.) 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.
4.) Extreme Cleaning
Not every investment property improvement needs to include expensive construction. If you’re flipping a house, the first impression mean a lot. Power washing a garage floor, driveway or dated bricks can take decades off their appearance. For neglected areas like garage walls or basement walls, a fresh coat of paint may be all that’s needed. Steam-cleaning the carpets and polishing warn-out hardwood floors also helps make a strong first impression.
5.) 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. For example, 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 best be spent indoors.
6.) 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, but can give buyers that “wow” feeling — while giving you a 90% dollar for dollar return. Kuba Fietkiewicz, Founder or REIkit.com House Flipping Software, adds that replacing worn or damaged vinyl siding is likely to recoup the majority of your costs, while greatly enhancing the rent or sales appeal of the home.
A Final Piece Of Advice: Minimize Costs By Choosing Wisely
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 house layout is conducive to these types of improvements, you can avoid half the work and cost.
Improvements To Avoid
While the improvements above can bring a substantial return, other improvements will typically yield negative returns — and possible even hinder your efforts to sell your property. Among them:
- Swimming pools
- Luxury baths and kitchens
- Wall-to-wall carpeting
- High-end landscaping
Ready For Your Next Flip?
Even if you’re busy improving your most recent investment property, it’s never too soon to prepare for the next one. Apply today for a loan through Residential Capital Partners in just 14 minutes.