Tips on cutting costs?

Question

When investing in real estate, I know your money is made when you buy and not when you sell. With that said, does anyone have any additional tips on how to cut costs on materials when flipping?

William Harvey · Answer

@Nathan Harden is spot on and this is something we do as often as possible. The biggest thing we started doing after our first 2-3 flips is focusing on the higher-roi aspects such as kitchens and baths, and then doing "just enough" for everything else.

If you filter every renovation decision through the lens of "what is the cheapest option that brings the most value?" this will likely lead to you spending less money. We over improved our first 2 houses because we thought every little thing had to be perfect. I believe that by simply adopting this kind of mindset you'll cut costs tremendously. We certainly have.

Nathan Harden · Answer

One way to cut costs on a rehab is to leave the existing floor and roof in place and just put the new materials on top of them. As long as this already hasn't been done multiple times. This will save you in dump fees and labor.

Michael Mannino II · Answer

Hi Maria! I wouldn't say "cut costs" necessarily, but what we've found works really well is setting our prices for each job our contractors do. For example, they get "x" amount of $ for every door knob they switch, "x" amount to change a light fixture, to lay LVP flooring (per sq ft), to hang a door, etc. With everything easily laid out for them, we can all see exactly how much a rehab will cost, and it also motivates the contractors to get things done! With this process in place, they can make the same amount to change out a light fixture whether it takes them 30 minutes or all day, that's up to them. We've found our contractors are more productive and there is much less confusion on renovation costs/budget.

I'd love to chat more about how I've set this up and help you out any way I can!

Bob Stevens · Answer

Yes connect with those doing A LOT or renovating. We install brand new furnaces for only $1700 HW tanks about 1k, We buy in bulk,

Good luck

Jackson Ebersole · Answer

Hi Maria,

When flipping properties, cutting costs on materials can significantly boost your profit margins, however, you always want to maintain a minimum quality so my first advise on how to spend less is to plan the rehab in a way that optimizes the value return you're getting. Let me explain that: plan your rehab to change the things that are going to add the most value to a property, such as adding a bathroom or a bedroom, making a little expansion. For example, adding a bathroom can increase your home's value by 10-20%, depending on the quality and type of bathroom. A full bathroom addition can potentially boost value by up to 20%, while a half bath might add around 10.5%. The cost of adding a bathroom typically ranges from $25,000 to $60,000 for a full bath, or $6,000 to $12,000 for a half bath. However, you can expect to recover about 50-55% of your investment when selling the home.

Another good option would be to consider converting attic space, finishing a basement, or repurposing a large living area to add a bedroom without expanding the home's footprint.

Some other tips to help you save on materials while still creating an appealing finished product: buy in bulk, shop at discount stores and outlets, look for overstock, discontinued items, or slightly imperfect materials, attend auctions and Estate sales, incorporate reclaimed wood, vintage fixtures, or other salvaged items for a unique look at a lower cost, build relationships with suppliers...

If you have any more questions or are looking for funding please feel free to reach out to us, we're a private lender.

Regards,

Jackson

Maria Cox · Answer

Thank you! This is very helpful.

Nate Mur · Answer

It depends on who is doing the work. If you have a contractor that really understands how a spreadsheet and investment properties go, and is willing to install products you already have. It also depends on your target buyer, are they going to pay more for perfection, or do they want to pay for good enough? Going cheap and attempting to present perfection shows up in pictures.

I shop. Constantly. Marketplace, auctions, pallet jockeys discount stores. Amazon returns. Scratch and dents that can be hidden either with paint or behind a cabinet. I stay away from secondhand and thrift places, and make friends with contractors that get huge discounts at supply stores (sherwin williams, plumbing wholesale) Sometimes buying in bulk and selling what you don't need is a great way to meet people doing the same thing as you.

As much as I love the ease of installing LVP, if home depot is running a free carpet install promo, I'm getting carpet! Not sure if they still do that anymore.

Know what everything costs, be ready to jump as soon as you spot a deal, and be creative enough to make it look good.

Hope there's some useful insight somewhere in there!

Maria Cox · Answer

Thank you Bob!

Maria Cox · Answer

Thank you, Michael! I'll add you and send you a DM. I have more questions about this strategy!

Tips on cutting costs?

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