Home Renovations: Profiting off a flip, where should money be spent when fixing up a home for resale
Part 1: Look At Comparable Properties
Don’t over-renovate. Only spend on upgrades that add value.
The three key factors in valuing residential real estate are location, location and location. This is important to remember when figuring out what improvements to add.
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.
Remember, not all improvements add value. Such things as home offices, concrete patios and sports courts generally do not add value to a property. Be careful not to spend your money on things that will limit the number of people interested in the property.
Look at houses that are on the market in the area. Which ones are selling the fastest? What improvements do they have in common? Now look at the ones that have sat on the market the longest. What do they have in common? Learn a lesson from both of these kinds of properties to determine how to maximize your return on home improvements.
Part 2: Establish a Strong First Impression
It doesn’t matter what is going on inside a house, a negative first impression upon arrival is hard to come back from. The lesson is to make sure that your property has great curb appeal, so that the potential buyer looks forward to seeing what is inside.
Doing easy cosmetic fixes can make a big difference. Some suggestions for things that will give you a big bang for your buck include:
Dressing up the front door by painting it a contrasting color
Replacing old exterior hardware like door knobs
Making the entryway symmetrical
Installing outdoor lighting
Planting flowers and plants
Most of these are not very expensive, but along with your marketing plan they will make a huge difference in attracting the right buyer for the best price.
Part 3: Kitchens and Bathrooms Sell the House
In the highly competitive residential home sales market, you cannot have a dated kitchen or bathroom and expect to get top dollar for your property. Not only are these improvements the key to getting a good price for your house flip, but they are crucial for getting people interested. They will surely decrease the days a property spends on the market.
On average a medium size kitchen remodel (100-150sqft) can cost roughly $19,500 - $52,000 and the average cost of a bathroom makeover is $5,000-$13,000, depending on renovation required. Kitchen and bathrooms are some of the best renovations for resale as they will make buyers fall in love with your property, and pay for themselves.
Keep in mind that not every kitchen and bathroom needs a complete overhaul, but most will require some updating. When looking at your kitchen cabinets, ask yourself, do they need to be replaced, or can they be refinished, refaced or painted?
With regards to bathrooms, it may be possible that the existing pieces, such as a toilet or shower can be used, and the fixtures such as vanities and lights need replacing. Updating the paint or replacing the hardware in the room may be an easy fix.
Part 4: Don’t Impose Your Personal Style
Focusing on neutral design elements will appeal to the largest buying audience.
For example, you may think that painting a mural of the outdoors is beautiful and brings nature inside, but most people will not agree with you. Important items, like countertops, bathroom fixtures, flooring and wall finishes should be in colors that appeal to the greatest number of customers. Therefore, soft, neutral colors should almost always be used. There is room to use bright colors and unusual materials as accents for the purpose of drawing attention to things, but they should never be predominate. They should always be touches, not overwhelming amounts.
Part 5: Cost
Don’t invest more into the property than what the property is worth.
Frequently, people get so wrapped up in projects that they stray from their business plan and drastically overspend on a property. When this happens, they are completely shocked when they do not make a profit on their flip or resale.
It is very easy to lose track of costs and over improve a property, in a desire to deliver a certain wow factor. While you do want that wow factor, you need to be careful about how to achieve it.
Before starting a house flip or getting deep into a reno, make sure you identify where you are going to spend a lot of money and where you are not. While there may be overages on allocated costs, for unforeseen circumstances (this is what a contingency fund is for). If you end up overspending on your budget and deplete the contingency fund, you will end up losing money or not making as much as you had hoped for.