How to Add the Most Value to your Flip
The question always comes up, what can you do to add the most value to the home you are trying to flip for profit? This is something we touch on in a number of our blog articles but wanted to focus a little more on it today, just in case you weren’t paying attention.
The two that really pay for themselves the best are kitchens and bathrooms.
According to the National Association of the Remolding Industry (NARI) remodeling a kitchen can give you are recuperation of about 150%.
What this means in real terms is that if you spend about $10,000.00 on remodeling a kitchen then you could reasonably expect to increase the sales value of your flip by about $15,000.00.
Of course, this assumes that your flip actually needs a kitchen remodel. It will do you NO good to remodel a new kitchen unless you can drastically upgrade or give it a much better design. When we talk about remodeling a kitchen to get a 150% increase in home price we are referring to a kitchen that is outdated and poorly designed.
Let’s look at some other estimated remodeling returns. Again, we are assuming these items actually need to be remodeled, do not remodel something that does not need to be updated.
If you add another bathroom to your flip then you can only expect a return of about 105%. This means if you spend $10,000.00 then it will increase the value of your flip by $10,500.00. There are exceptions here. For instance, if you have a 3 bedroom 1 bath home and you make it a 3 bedroom 2 bath home you may get a higher return.
The key in the example above is not to price your flip house out of the market norms. It is very difficult to sell a $150,000.00 home in a neighborhood that will only support $125,000.00 homes.
Adding a family room will only give you about a 96% return. Yes, you could lose money adding a family room but once again it depends a lot on the design of the house and the overall housing market.
Adding a master bedroom suite will return about 86%. But, there are times if you have enough margin that this will increase the house more and make it easier to sell faster. Even if you do not get a 100% return it could still be beneficial to add a master bedroom suite.
A siding replacement will return about 83% on average. But, if you have to have this in order to sell the house then it could be a must. Curb appeal is very important when it comes to selling a house.
A deck addition will give you a return of about 76% on average. But, will it make the home easier to sell and take it to the next level?
These are all major renovations, what about smaller items, what kind of returns can you expect there?
Let’s look at windows, putting in energy efficient windows to replace old worn out windows and be a huge selling plus.
New floors can be an easy way to improve the overall beauty and impression of the home. New floors are a pretty standard improvement that can really pay off. As previously said, you cannot spend $50,000.00 on new floors in a house you want to sell for $100,000.00. Make flooring decisions based on the housing market and expectations you are in, not the market you would like to be in.
Painting is a very easy way to improve the looks inside the house as well as add curb appeal to the outside. It is a very easy thing to do and is one of the things you can most easily do yourself.
Installing new lighting can modernize and completely change the impression of the house. This is another relatively cheap thing you can do to improve the look of the home. Many times if you have and expertise at all you can even do it yourself. Of course, if you do not know how, hire an electrician. Don’t take any chances, paying an electrician to install lighting is not that expense when it comes to your remodeling budget.
If you have the space adding a large walk in closet can add value to the home. Especially if it is in a master suite. I would probably not recommend it if it is not in the master bedroom when it comes to flipping for profit.
If you can create large open spaces this is very popular in modern homes. Primarily this is most effective between the kitchen and family room. However, be careful that you do not over spend when it comes to load bearing walls. Removing walls needs a professional. Don’t spend $30,000.00 to open up a room if you are trying to flip a $100,000.00 house for a profit. You won’t be successful. You have to always keep in mind the realistic value of the house as compared to what you are going to spend on any one project.
Landscaping is a must from a curb appeal standpoint. If you can’t get people to come in the house you will never be able to flip it. You do not necessarily have to break the bank when it comes to landscaping. Sometimes just cleaning up and pruning bushes will make a world of difference. Don’t forget to cut the grass. Tall grass is a killer from a curb appeal standpoint.
WARNING, generally a swimming pool will not add value to a house. I would never install a new swimming pool on a house I am trying to flip for profit. I also normally try to avoid buying a home to flip that has a swimming pool.
If your flip home does not have a fence then consider putting one around the back yard. Families with children or dogs will really appreciate it and depending on the size of your yard you can normally make the numbers work. If it does have a fence make sure it looks good. You can easily paint a wood fence yourself if it needs a little TLC.
No matter what, never remodel your flip to a point that you are over what similar houses in the market are selling for. You may think that if you really go overboard on your house you will be able to sell it 20% over market value, but most of the time you will be wrong. Even if you ultimately get the price you want, how long will it take to sell?
If you are a house flipper you want to remodel and sell quickly. Not hold for months incurring holding costs while you hope to sell it. If you are not buying, remodeling and selling you are not making money. Isn’t that why you are flipping houses to begin with?