By Hard Money Russ
Imagine you just closed a deal on the perfect property for flipping: an older, undervalued home with high profit potential in an up-and-coming area.
With the deal closed you are ready to roll and get down with maximizing your ROI.
This could mean tearing down the walls, changing the floor plan, installing a new kitchen, or digging a hole in the yard for a new in-ground pool.
You spare no expense because you figure that all of these moves will contribute to a higher list price and thus a higher profit.
After all, it takes money to make money, right?
This is a trap that beginner investors often fall for – getting too eager and overspending on renovations.
Worst case scenario, you are unable to find any buyers at your asking price and will have to keep lowering it, turning a once promising profit into a substantial loss.
When renovating a property, it is important to understand the local housing market in order to make the correct remodeling decisions.
This means comparing property prices, researching demographics, and knowing what features buyers will pay for.
“It is very easy to over improve a property and end up with a product that is beautiful, but overpriced for its location.
While some buyers might spend a small amount more for a more improved property, they will not likely spend a significant amount more if there is nothing in the area selling for that high of a price.”
Furthermore, not all renovations have the same return on investment.
Pools, for example, can actually decrease the value of a home due to their high maintenance costs and safety concerns.
Spending money on design elements or luxury features like a hot tub, in-ground pool, or sports court, is not worth it and can limit the buying pool as there will be fewer buyers with such unique preferences.
A better strategy for renovating is to focus on the fundamentals by making sure your choices appeal to a wider market.
Outside of necessary repairs, here are ten high value fix and flip ROI improvements you should make to attract more buyers:
If you’re going to spend money, the kitchen is generally where you'll see the biggest return.
But be careful as it's is easy to go overboard with a full renovation.
Instead, try to look for cheap improvements that can be made without tearing everything out.
Like kitchens, bathrooms get lots of wear-and-tear and can be a deal breaker if they are not restored properly.
Expert flippers salvage what they can and only make the necessary improvements to stay under budget.
Assuming the sinks, toilets, and showers are in good condition, easy fixes that add value include new medicine cabinets, faucets, shower heads, and a fresh coat of paint.
Sanding and refinishing older wood floors can make them look brand new.
However If the flooring is beyond saving, using cheaper materials such as linoleum, vinyl or laminate flooring is a perfectly good substitute and can be half the cost wood or tile.
A fresh coat of paint is a cost effective fix that does the most to revitalize a home.
Be sure to use a neutral tone that can appeal to a large audience since bold colors can turn off potential buyers.
If you want to save even more, you could do this yourself and save a bundle on labour.
Warm lighting creates the cozy ambiance that turns a house into a home, so it is important to get it right during your open house.
Though lighting is a small detail, there is a lot of nuance to it, and it can increase your home value.
Dimmer switches allow homeowners to set the mood of the living space, a desirable feature that adds plenty of value over the cost of installation.
Another cheap upgrade is LED bulbs, which are more energy efficient and appeal to those who are more environmentally conscious.
Installing double pane windows is a good long term investment in terms of energy savings, but has a high initial cost in the thousands.
Depending on the climate, a property can be competitive in the market without them.
A good cleaning and a new paint job should do the trick.
Siding takes up the most surface area of a home's exterior, so it plays a key role in making a good first impression.
Make sure your siding is in tip-top condition and the color matches the neighborhood.
Power wash first to see if it needs to be replaced; sometimes this simple solution is all that's needed to make a home look brand new.
Upgrading doors with new paint and doorknobs is an easy DIY project that takes just a weekend.
Pay extra attention to your front door since it sets the tone for how your guests are welcomed into the house.
Hopefully the garage door does not need to be replaced because these can cost a few thousand dollars.
Provided that the garage doors are in working order, all they'll need is a good pressure cleaning or a fresh paint job to boost the property's curb appeal.
Having a pristine front yard may not close the deal but will give a great first impression and attract qualified buyers.
When making renovation decisions start with necessary repairs.
Choose low cost upgrades that deliver high value over pricey personal projects, and look around your neighborhood to make sure your property is up to par.
Follow these steps to guard your profit without busting your budget so you can move on quickly to your next flip.
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