What projects within a rehab produce the best ROI?

Question

Hey BP,

Curious if anyone out there can chime in on what specific projects within a rehab produce the best ROI. Obviously this assumes that there aren't major infrastructure items to be addressed (ie. functioning roof, furnace, hvac, electrical, plumbing etc), but the projects that come to mine for me are painting the interior, granite counters, flooring, and prefab bathroom vanities.

Anyone have their list or case studies that they care to share?

J Scott · Answer

What do your competing houses look like?  What level of finishes?  That's the quality you need to equal/surpass...

Roy N. · Answer

It really depends on your intentions for the property.  Are you planning to live in it, sell it, or rent it.   Your selection of "projects" will be different in each scenario.

We are buy and hold investors but even among our selection of rentals, we would have different priorities:

• student rental units - looking for simple. healthy, efficient, durable, and easy to clean;
• rooming house - focus is even more heavily on energy/resource efficiency since we carry the costs.
• executive rentals - higher end finishes and furnishings.

J Scott · Answer

From an ROI standpoint, the best ROI items are the things that will take the house from being unable to allow a buyer to qualify for a loan to a house that is in good enough condition to allow the buyer to qualify for a loan.

Beyond that, there's not enough information to answer your question.  For example, if a house is 100 years old, but with brand new kitchens and baths, then spending more money in the kitchens and baths isn't going to be the best use of your funds.

Robert Blanchard · Answer

In the Summer months, sometimes a bit of landscaping can really add to the curb appeal to a house. Usually it doesn't cost too much but can bring a good ROI.

Manolo D. · Answer

i would say kitchen and bath. they dont really notice paint and and floor that much. then again, they would not visit every property posted.

John Moore · Answer

In my opinion I'm guided by what I acquired the property for, the carrying costs and what I might be able to sell it for.  The improvement costs are a direct reflection on what I might make as profit and influence my decision on what improvements I can make.  I would be influenced by comps and do the improvements that would take my home off the market the fastest.   If you have a substantial spread, then you can put your personal touches on the project.  To answer your question more directly, the front door, the foyer, the front yard, kitchen cabinets, appliances, bathroom appearances, custom closets.  Good luck.

RJ Reynolds · Answer

Actually, I am frequently surprised when buyers I'm working with have difficulty seeing past the paint color.  Having said that, solid kitchen and bath and stunning first impression (front door) always help.

Will Barnard · Answer

Generally speaking, your best ROI comes from new paint, curb appeal landscape, garage door, etc) upgraded bathrooms, upgraded kitchens, upgraded flooring. Additionally, changing a poor flow or layout to a better flow or better layout will also have tremendous ROI benefits.

In your specific circumstance, we all would need to know your current market conditions, your subject property details, and what the competition has to answer such a question.

Jeremy Jones · Answer

I always try to find one, or a couple, specific details in each rental unit that can be a bit "special" above the baseline necessities, such as stainless steel appliances, gravel/bark for landscaping, a thicker trim and nice trim/wall paint contrast, a better grade of carpet, or a brand new front door.  Many times the competing units in the area will lack that attractive detail, which can stick in the minds of prospective tenants and create a slight competitive advantage.

I'd recommend exercising your own intuition to find the renovations most suited to each property and area.  After developing your "personal touch" and adding experience you'll be able to hone in on your desired approach.

William Yeh · Answer

To be more specific, I have an early 90s home in Fairfield with standard builder grade materials throughout for that era (solid oak cabinets, linoleum floors, gold accent hardware in bathrooms, tile counters, etc.) My thoughts on best bang for the buck on the interior are paint (standard light khaki color), granite counters in kitchen/bathrooms, tile floors in kitchen/bathrooms, new hardware in kitchens/bathrooms, new doorknobs throughout.

The home is 3000+ sq ft so I'm debating on whether it's worth it to upgrade the windows and do some of the larger cap ex items which are nice to haves but are perhaps afterthoughts in terms of selling the home. Obviously I'll be fixing anything that flat out doesn't work (hvac, furnace, water heater, etc). Any feedback on the items I've listed?