Where to put money into a flip

Question

Hey, i have heard sooo much talk about flips and formulas and contractors but not as much about where i should put my money in a flip, kitchens gotta be a big one, any tips or focal points where i should be spending money to maximize flip profits?? Thanks

Michael Hayworth · Answer

Google Cost vs. Value Report and download the latest one. Remodeling Magazine does a very well researched report each year, broken down by region of the country, as to what improvements add the most value to your house. That's a great place to start.Kitchens & baths are generally the important. But even more important is making them look good cost effectively. There's really great looking porcelain tile out there for $1.50/sf. Find good combos in that price range and keep using them, rather than doing an all new plan on each house and using $5/sf tile. There's good granite for $30/sf - that BS the blond chick does on Flip or Flop of picking $90/sf quartz is only great if you're flipping million dollar houses and someone else is really paying the bills anyway. (Also...quit watching flipping shows. They're BS.) (So are the other home reno shows, but at least Fixer Upper & Rehab Addict will give you a feel for the styles people will want...buyers watch those shows, so if your house looks like things JoJo has told them look great, they'll love it.)@Aaron Lovett makes an important point about curb appeal. I'm a remodeler. I used to do great houses and put no money into landscaping. My gf got me doing a better job on those, and it really helps.And as @Ed Matson mentioned, don't put money into windows unless they're broken. You never get your money back on those. Buyers don't care about infrastructure.Things that are shaky on getting your $$ back.... Flooring is very expensive. Has to look good, not cheap, but pricing is huge here.Windows are almost always a bad investment.Sunrooms, porches, etc. are usually a bad investment.Roofs are a bad investment. Unless the current one is really bad, repair, don't replace. (Says the guy doing two roof replacements right now...but they were really bad, and I have my own crews.)Pools, extensive landscaping beyond basic curb appeal, porches, other outdoor stuff is usually a bad investment.HVAC - if it works, leave it. Nobody says, "Oh, it's got a new energy efficient Trane unit - I'll pay more!"Doors are iffy....if it's got the old smooth really cheap hollow-panel veneer doors, they're probably worth replacing. But you gotta be careful about funds.I'd disagree about widening doorways unless they're really bad. Also, adding arches and other nice touches costs $$ and doesn't get much $$ bad.Things that are pretty cheap that make a difference: Oversize baseboards and crown molding don't cost much if you have a decent remodeler, and they add a lot to the appeal of a house. (Having it done by a "trim carpenter" will be expensive. If you've got square rooms, any decent carpenter can do crown.)Staging - do "light staging" with decor on countertops, towels, things like that. (Not furniture). Makes a big difference.If the tile is decent but the tub is bad, you can have a tub refinished pretty cost effectively.New plumbing fixtures even if you're keeping the existing tile. Pfister makes a Universal kit that has parts to attach to even most no-name builder-grade shower valves.Probably lots more I'm forgetting, but you're getting good advice above.Big thing - everything has to work with the budget. When I was new at this, I kept doing "one more thing, one more thing", like I was gonna live there. I made beautiful renovations, but didn't make much on the houses. You want the overall product to look good, but have to resist "scope creep" firmly.And always leave budget for "unforeseen"....it always shows up.Good luck!

Aaron Lovett · Answer

Hey @Jake Navarra, obviously depends on the condition and resale value of the property, but I focus about 80% of my money and time on:1. Kitchen2. Baths3. Curb appeal (landscaping, entryway, etc.)4. Flooring5. Structural improvements (opening up entry-ways, increasing bathrooms size, etc.)This strategy works for me, but I have a construction background, so I know what improvements are possible and what improvements I will make before making an offer, and I'm able to either do the work myself or keep a knowing eye on any contractors who might try to cut corners. As always, if it's not done right, you'll wind up paying for it in the end.

Thomas S. · Answer

When it comes to home buyers it's all about the lipstick. All of the items previously mentioned have no bearing on structure. Spending money on infrastructure, although necessary, only eats up profits unless you are increasing square footage. Concentrate on the lipstick, as stated kitchens, baths, floors, master bedroom and fluff, as that is usually all home buyers ever see. Remember 9 time in 10 the wife chooses the home based only on emotions.

Christian Wathne · Answer

@Jake Navarra This may help; here's a renovation budget sheet I just completed for a house I'll be closing on in a few weeks. Its a small 3br/1ba rambler in western washington. We'll be gutting the thing and replacing most every surface; however the layout is ok so we wont be doing anything in the way of moving walls/etc. The below spreadsheet may give you an idea of costs. Note; on this deal I have partnered 50/50 with a contractor; he is not being paid for the work; essentially he is renovating for free in exchange for 50% profit, so my labor costs are very low (bringing in subs for some small items and day labor to help, but no large labor costs). Another note; these are estimates and not perfect. Inspection ChecklistRepair Cost CalculationsEstimate Repair CostDEMOdemolitiondumpster rental ($800) + day labor1400ROOFgutters / downspouts2 of 40ft runs + 4 downspouts500ROOFroofing 13 squares ($270/square)3500EXTERIORpaint and exterior trim + small bit of accent cedar shingle siding over carport to tie new wood front door1100sq/ft single story2500EXTERIORexterior front doornice wood door + poly600EXTERIORexterior windows (if needed) + back slider (if needed)may not need2500EXTERIORlanscaping/ grass/ tree trimmingseed grass; boxwood bushes; general clean up / pressure wash / etc1000EXTERIORfence145ft ($15/ft)2200EXTERIORdeckconcrete top coat on patio250INTERIOR GENERALelectrical and plumbingminor work2000INTERIOR GENERALframing and drywall/ textureexpect minor1000INTERIOR GENERALcloset systems for 3 bedrooms$300 buget per closet900INTERIOR GENERALinterior doors8 doors + hardware1600INTERIOR GENERALinterior trimfjp base + door + window trim1500INTERIOR GENERALflooring 1100 sqft; costco engineered wood $2/ft + install3000INTERIOR GENERALprime and paint intieriorflat white for ceiling + walls // satin white for doors + trim1200KITCHENcabinets Grey Shaker installed4500KITCHENfixturesfaucets / garbage disposer / cabinet handles1500KITCHENcounter topsquartz installed3000KITCHENSS appliance setfridge / dw / mic / oven2800BATHbath 1small full bath (gut and replace)3500LAUNDRYincluded in above flooring/trim/door estimatenot buying washer/dryer0CONTINGENCY FUNDcontingencies (water heater / furnace / electrical / plumbing / anything that goes really wrong)MISC4000TotalTotalTotal44950

Ed Matson · Answer

@Aaron Lovett is spot on. Having just sold our first flip confirms his comments. Absolutely no one commented that we put in upgraded windows. It was all about the kitchen, open floor plan, beautiful hardwoods, and baths.

Mary Derman · Answer

@Jake Navarra definitely the kitchen but the bathrooms are just as, if not more, important to focus your rehab dollars.

Cooper Bert · Answer

@Brian Pulaski - Agreed on the impact of wainscosting. If you are good at that and want another big bang feature, add crown moulding, chair rail, picture frame window casing and tall base with shoe mould. The actual trim is cheap (if you buy at a lumber wholesaler, not big box store) and home builders charge a huge margin so the perceived value is great.We go back and forth on opening walls. We do the work with our own crews and frame, LVL, drywall & finish material costs are usually less than $500 for up to 20' widths, so not much cost directly associated with the opening. These changes do tend to add days to the project though. The results are awesome and we do this on almost all of our mid-level renovations and up. BUT... I haven't seen any increased value in appraisal or buyers who actually place a value on the "open concept". We believe the value in opening walls is as a sale "closer" and is not really accretive to the property value.The dillema of putting money into kitchens is that it has become difficult to differentiate kitchen "upgrades". Seems like even entry level rehabs have white/grey cabinets, slow-close drawers, granite counters, stainless appliances and an island of some type. Custom tiled tub and shower surrounds still seem to separate the truly "upgrade" bathrooms from the regular baths. We are starting to see the need to put double vanities in even the mid-level rehabs.We brought electrical and plumbing in house due to cost but mostly because of the delays. It's very frustrating to hold up a project because the crew runs into a hidden plumbing problem or electrical issue that needs attention. We made this change when we adapted the strategy to replace virtually all copper in our rehabs with pex, and all exposed electrical. We hold and manage all our rehabs so these total replacements eliminate repairs and CapEx costs of plumbing & electrical. I wouldn't advise this extensive replacement for flips.

Brian Pulaski · Answer

@Christian Wathne I'm jealous of that. Electrical and plumbing $2000... I am doing a rehab, just some rework for the kitchen, a few added items and required smoke/cos and just electrical is $4500. Added a bath so the plumbing is approaching $7000. I would love to carry $2000 for this, but even the cheapest house I have done both of these scopes have have run much more than that.I agree with everyone, kitchens and baths. These sell. Make them function and make them look nice. I think opening walls makes a huge impact for short money. A beam and carpenter to do the work usually runs me under $1000. The drywall and finishing usually under $1000. For $1800-2000 you can have an open floorplan that "wows" potential buyers. It's something I always plan to do from now on.Another thing I do, shadow box/wainscoting. Short money (I do it myself) and I have had nothing but praise about it. If your paying a lot for labor it might not be worth it, but if you have basic abilities, a mother saw and trim nailer, you can knock it out in a day and make a statement.

David Faulkner · Answer

Study the for sale comps in the market near the property very carefully, as in physically go into them and look; this will give you an idea of the type and level of finishes that are typical in that market and guide you as to what to put into the flip. Yes, all the areas mentioned previously are good, but you can spend $3k-$100k on a kitchen for example ... just want to make sure you don't put the $100k kitchen in a neighborhood of $3k kitchens, or visa versa :) Selecting the correct level and type of finishes is every bit as important to your bottom line as is which areas of the house you focus on.

Cooper Bert · Answer

We evaluate capital allocation into renovations based on the following criteria:(Note - The items listed are examples, not complete lists)MANDATORY REPAIRS: (No Return BUT must be done for sale at Market Value)Code ViolationsMold RemediationWater IntrusionAsbestos RemovalInsect DamageFoundation CracksLeaking / Curling RoofLeaking / Damage GuttersDamaged / Rusted RailingsREPLACE SALE DETURENTS: (No Return BUT must be done for sale at Market Value)Original Windows >> Replacement Windows Oil / Electric baseboard heat >> Gas / Heat PumpNo Air / Window Units >> Central Air100A Electric Service >> 200A Service>> CONGRATULATIONS, AFTER THE EXPENSE OF THE ABOVE REPAIRS THE PROPERTY IS NO LONGER "DISTRESSED" <