When considering a real estate purchase that you intend to quickly flip for profit, it is necessary to remember the “fix” part of fix and flip investment. Likely the property you are considering is in need of at least some repair and renovation. While it is usually fairly obvious which repairs are absolutely essential, sometimes the choice of where to spend renovation dollars is not so clear-cut. Since your profit margin will
be vastly affected by decisions you make in this area, which renovation projects have been proven to bring the biggest returns? At what points in the project can you spend a little to reap a lot?
When making that determination, it is wise to consider the neighborhood. Generally, you want any renovations you make to be consistent with the basic make-up of the surrounding houses. While you want your property to stand out as desirable, renovations that would make it vastly different from other properties in the areas may reduce the likelihood that buyers will be enticed by your changes.
Following that same line of thought, there are some improvements that actually reduce resale value. A perfect example of that might be the addition of a swimming pool. While it might sound like a good idea, research indicates that a swimming pool can be a turn-off for potential buyers, as the upkeep and maintenance required for a swimming pool might be a source of buyer concern.
So, what are some proven areas where renovations improve property values and increase your potential ROI?
Research consistently indicates year after year that the three areas where your renovation dollars most count are the home exterior, the kitchen, and the bathroom.
Changing the home exterior can transform a plain Jane home into a charming and inviting vision. Since potential buyers form their first impressions even before entering the front door, sprucing up the home exterior can really pay off. Replacing old, faded, or damaged siding is a cost-effective project, but it can instantly transform the look of the whole property.
What if your property’s exterior is brick? Pressure washing is an inexpensive way to put a shine on the exterior. Painting trim, replacing faded shutters, and installing a new, eye-catching front door can do much to increase curb appeal and win the attention of potential buyers.
Cleaning existing walkways or paving a new walkway also adds appeal. Replacing a sagging mailbox is a good finishing touch.
Since many families spend a great deal of time in the kitchen, making kitchen renovations is a wise choice. Realtors report that a vast majority of potential deals fall through because of dissatisfaction with a kitchen.
While things like granite counter tops or custom made cabinetry may be more of an investment than you want to make, good results can be achieved for much less. Sometimes, simply painting or re-staining existing cabinetry can give a kitchen a needed facelift. Many counter tops made of composite materials mimic the look of granite nicely, while eliminating some of the future maintenance issues associated with granite. This can be a real selling point for potential buyers, if you choose well-crafted materials.
New appliances are also attractive to buyers. It is not generally necessary to choose the latest and greatest appliances, however. Sometimes, simpler, more inexpensive appliances will suffice.
If the kitchen is dark, providing a good source of light will do wonders. If possible, installing a window to capture natural light is a comparatively inexpensive renovation project. If that is not practical, choosing decorative artificial lighting is a good option.
Painting kitchen walls can brighten up the space as well. After painting, consider flooring options to enliven the space. Home improvement stores offer a variety of inexpensive tile or laminate options that are both easy to install and beautiful.
Second only to the kitchen, bathroom renovations have been proven to increase property values tremendously. Because the floor space in a bathroom is usually small, decorative tiling in this area is fairly inexpensive while really revving up the eye appeal. A fresh paint job can also do wonders.
As for sinks and vanities, replacing dated fixtures is a simple, inexpensive way to modernize the appearance of the whole room. Vanities can be painted or re-stained easily. Increasing sources of light in the bathroom also serve to enhance the overall appearance without putting too much demand on your wallet.
Adding the finishing touches
Changing light fixtures throughout the house, changing electrical outlet plates, and changing heating and air registers are all inexpensive switches that make for a better overall look and feel to the property.
With a careful, frugal approach, you can make a major difference in the outcome of your investment. Before each choice in these areas, consider the neighborhood, the characteristics that define potential buyers, length of time needed to complete the renovation, and the funds you are willing to spend. With one eye on improving the property and the other eye on your bottom line, you can successfully fix and flip investment property.
If you would like more information about fix and flip investment, please contact us. As a private money lender, we work with fix and flip investors every day to facilitate the needed funding and increase the profitability of your investments.
Center Street communications are not intended to provide business, legal, tax, investment or insurance advice. No Center Street communication should be construed as a recommendation for any business or investment strategy by Center Street or any third party. You are solely responsible for determining whether any investment, investment strategy, business strategy or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your legal or tax professional regarding your specific situation.