How to know if its worth a low or high end renovation?

[Sheri H.]

Hello all,

Thank you for your patience. We are new to his site and also the whole flipping idea.

Ok here goes. We hear a lot of stories of people looking at making at least say 20K profit on a flip and using the 70% rule as an example. We however are looking at buying in our local market where prices on the usual sites are listed at most, 30k lower than expected ARV.

Our Agent has always suggested we do the very bare minimum of rehab in order to make any real profit. Yet so many tv shows and articles claim houses with granite top counters, hard wood floors, decking etc will guarantee massive profits...We would love to do these kinds of reno's but not if our agent is correct and says "If you spend $25k on a rehab and the houses in the area are worth less you wont sell" If the neighbor only has vinyl floors and laminate then you'll lose on what was spent on hardwood and granite etc. 

Any help with this issue is greatly appreciated. We gather for us to do a high end renovation we would have to be able to buy the said property for next to nothing compared to the market value of the area? A deal I imagine to be too good to be true and very few and far between? If I'm completely wrong please advise.

[Will Barnard]

So first off, how many flips has this agent completed? If that answer is zero or less than 3, then Do Not take advice from an agent who has no experience, or anyone else for that matter.

Second, it has been my experience with over 6 years of renovation flipping that doing less rehab as opposed to more almost always works against you. Now keep in mind this comes from experience here in So Cal where the average 3 bedroom 1500 sq. ft. home in my farm area goes for around $350k-$400k. If you are working in price points under $100k, my advice would be different. The best way to force appreciate a home is through renovations in the kitchen, curb appeal (front and back landscaping), bathrooms, paint (interior and exterior), and flooring. Next is fixing a bad layout and flow by removing and adding walls. So long as they are non load bearing, the cost vs the benefit is well worth it.

Now, all this is not to say that you should not pay close attention to what the competitors homes have. You certainly do not want a 3000 sq. ft elaborate home when every other home is 1000 sq. ft with basic finishes.