How come "Costs vs. Value" charts never show remodeling costs being completely recouped?

Question

I am a newbie here and I have been recently investigating the possibilities of rehabbing and flipping homes in my area. One thing troubles me though: although I've read about (and heard on the BP podcasts!) about the nice profits rehabbers and fippers can make, most real estate "Cost vs. Value" charts never show any remodeling projects completely recouping their costs in the resale value added! How could a flipper ever make any money? Would anyone care to explain this apparent discrepancy between how a "flipper" can make money on remodels compared to the average homeowner remodel? I know flippers try to buy the homes below market value, but according to some of these charts,(I will link to one below), the average mid-range kitchen remodel only returns 63-75%, for example ! You'd have to buy the house waaay below market value in order to just break even if that were true. Yikes! Or are those charts only really accurate for the typical home that isn't in all that bad of shape to begin with. If that is the case, then do rehabs only pay if the home is in such bad shape that only a rehabber would buy it in the first place? Just curious how to make sense of these numbers.

Thanks so much.

http://www.remodeling.hw.net/cost-vs-value/2013/**

Thanks so much.

http://www.remodeling.hw.net/cost-vs-value/2013/**

Phyllis E. · Answer

Thanks @Jeff S. and @Richard C. So it sounds like to make a good profit a rehabber should either 1.) act as his own general contractor to save the 15-20% GC profit and/or buy a home that is in very bad shape and priced accordingly-not just a little "dated"?

So, if I buy a home, for instance that is liveable and in average maintained shape but just needs some cosmetic fixing up, don't do any more major remodeling or it probably won't pay for itself?

Here is an example: Lets say I buy a typical 2400-3000 s.f. home in a desirable neigborhood in my local area that was built in the 1990's and has the typical builder-grade finishes of that era (plain oak cabinets, formica countertops, wall-to-wall carpeting in the living and dining rooms, plain 4 x 4 tiles in the bath--you know the type--serviceable buy "dated"--we have LOTS of them around here!) and replace and update the cabinets and appliances in the kitchen, and the cabinetry, fixtures and tile in the baths, would I likely not come out ahead when reselling?

Richard C. · Answer

Part of it that those charts are showing the impact of, for example, replacing a perfectly acceptable kitchen with a much nicer kitchen. Not the impact of putting a nice kitchen in the place of an existing one with exposed wiring and a hole in the middle of the floor.

Jeff S. · Answer

You have a good point @Phyllis E. Around my area it would be easy to have the contractor be the only one making profit. If you general it yourself you need to have reliable workers and those are hard to come by. You need an area that has a potential for higher than average values to really do well IMO.

How come "Costs vs. Value" charts never show remodeling costs being completely recouped?

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