Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes
I'm an investor in NW Indiana. We have done a few successful flips over the last couple years. On the houses we have done, our strategy has been to do a quality rehab and try to drive up the resale value of the house. We have been pretty successful at this, but sometimes I wonder if it might be better just to do a quick simple rehab and take what we can get. We have always gotten a decent return on the extra time and money we have put into rehab so i wouldn't say we have a problem necessarily. We also enjoy the process of taking a distressed property and making it truely beautiful again. However the ultimate goal is to make money of course.
With all the long time pros on here I'm hoping to hear what has worked for you guys and why.
Here are a few pics of a recent house we finished and sold in 24 hours for asking price.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
9y
Many if not most of the Fortune 500 companies who sell to the public use branding and the quality of your rehabs is "your brand". With that in mind, I believe you are doing it right and the fact that you stated you have been successful at it tells me you should not change your strategy. I have flipped many many homes and I have always prided myself on the quality of my projects. In fact, I have had potential buyers go to my website and look at previous work, go into escrow and then tell me they did that which helped them make their decision. My branding and the quality of the design and work stands out above most other flippers. This enables me to get top dollar and sell quicker. Time is your enemy on a flip so doing the average remodel will likely get you average returns at best and increase your opportunity costs.
"If the wheel is not broken, don't fix it".
By the way, love your rehab work, very good designs!
Real Estate Agent · Indialantic, FL · Member since 2014 · 182 posts · 80 votes
9y
For me, doing a full rehab is where the joy comes from. Knowing I'm providing a quality product to a home buyer is the only way I can do flips in good conscience. Now, there have been occasions where I have bought properties that were newer, and therefore needed less of a renovation. In the end though, the purchaser ended up with a great product and that's what matters to me.
Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
9y
Beautiful work!
It really depends on the neighborhood and the price point. If you're reselling in an entry level area and all the recent comparable sales are all in average condition and are selling quickly, you may not get the return you're looking for by going all out. Low sales price is going to be the key selling point here.
But for nicer areas that have higher price points and longer Days on Market, all the bells and whistles are a must to stand out.
It really depends on the neighborhood and the price point. If you're reselling in an entry level area and all the recent comparable sales are all in average condition and are selling quickly, you may not get the return you're looking for by going all out. Low sales price is going to be the key selling point here.
But for nicer areas that have higher price points and longer Days on Market, all the bells and whistles are a must to stand out.
I see your point. However, our strategy going in dictates what neighborhood we buy into in the first place, if that makes sense. Because we have gone in with the approach of doing a higher end rehab, we have bought into a higher end market. Our experience in doing this has been when we rehab a little better than what everyone else is doing, we get a little higher sale price and we think the time on market is getting reduced. One of my concerns is that if we do a more average flip that the time on market may increase.
For me, doing a full rehab is where the joy comes from. Knowing I'm providing a quality product to a home buyer is the only way I can do flips in good conscience. Now, there have been occasions where I have bought properties that were newer, and therefore needed less of a renovation. In the end though, the purchaser ended up with a great product and that's what matters to me.
Kindred spirit here for sure! It would definitely be out of character for me to try and do an 'average' project, but i do like making money lol..
That's the beauty of real estate, there's no right or wrong way to do it as long as you're making money!
Guess that's why there are so many topics on BP lol. Otherwise I guess there would just be a book. I am making money so I'm a little cautious about making any change. Just thinking about ways to maximize profits.
Congrats on some amazing work! I am wrestling with this same issue. We've almost completed 4 flips, with each one having a rehab budget over 100k and an ARV over 500k. Each project has taken a minimum of 4 months to complete. Of course, I expect both our budget and timeline to improve as we gain experience, but this is where we are currently.
The first thing that comes to mind with your question is the time value of money. Another thing is the availability of houses in various markets and conditions. If I could, I would build a business where all I did was minor cosmetic upgrades, maybe some staging, and back on the market within 2 weeks on houses built after 1990 in high demand areas with low days on market. In my mind, that will probably produce the better return over time. The problem is finding a steady stream of those to build your business around.
My plan is to do both the minor cosmetic rehab and the full gut jobs, with hopefully some wholesaling and real estate development mixed in. So far, all I've found are the full gut jobs.
Good luck! Let us know when you figure out your next step.
Congrats on some amazing work! I am wrestling with this same issue. We've almost completed 4 flips, with each one having a rehab budget over 100k and an ARV over 500k. Each project has taken a minimum of 4 months to complete. Of course, I expect both our budget and timeline to improve as we gain experience, but this is where we are currently.
The first thing that comes to mind with your question is the time value of money. Another thing is the availability of houses in various markets and conditions. If I could, I would build a business where all I did was minor cosmetic upgrades, maybe some staging, and back on the market within 2 weeks on houses built after 1990 in high demand areas with low days on market. In my mind, that will probably produce the better return over time. The problem is finding a steady stream of those to build your business around.
My plan is to do both the minor cosmetic rehab and the full gut jobs, with hopefully some wholesaling and real estate development mixed in. So far, all I've found are the full gut jobs.
Good luck! Let us know when you figure out your next step.
Yeah I guess we all are in search of the house that just needs painted and staged LOL that would be nice. We are starting a project now that is quite a bit smaller/easier than anything we've done so far. Trying to calculate the time invested vs profit ratio is kind of tricky, but I will update later with how it goes.
Another problem we have had is the inventory is so low in our market for cheaper houses it's really difficult to find profitable projects in those price ranges.
Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes
9y
I am wanting this discussion to be more about the extent of rehab rather than the size of the project, if that makes sense. That is, should I put extra money into bells and whistles to try and get more value out of the house, or just make the minimum repairs required as quick as possible and move to the next.
Cincinnati, OH · Member since 2015 · 81 posts · 24 votes
9y
Depending on the type of property you buy I don't think you always need to have a full remodel. Sometimes paint and carpet is enough. I haven't even done my first deal yet, so I'm somewhat a newbie. I do think you're finished product looks fabulous.
Contractor · Glen Cove, NY · Member since 2016 · 209 posts · 89 votes
9y
In years past, I always did full blown gut rehabs until one investor that I had introduced me to the quick flip. I liked designing and selecting finishes and I did make money on it however, my investor was a real money hound. his concept was to flip one every 90 days. He was a money man and not an artist with vision. Since he was funding that one, I said ok. let's do it your way. just a reasonable clean up and no frills. It went against my love for esthetics, He said lets sell it cheap and quick. take the profit and move on. Take emotion out of it. If they want glitz they can do that themselves. This is not a TV show. Its real life. Well, he was more than right, we purchased a house with a decent comp and to my surprise we made the same profit margin that we would have made if we did a full gut rehab and saved months of interest, labor, material and taxes. i guess I learned something new. You do not have to park your investment for a long time to make turn a profit. Just do a really good job of clean up and get the smells out, whatever that takes.
In years past, I always did full blown gut rehabs until one investor that I had introduced me to the quick flip. I liked designing and selecting finishes and I did make money on it however, my investor was a real money hound. his concept was to flip one every 90 days. He was a money man and not an artist with vision. Since he was funding that one, I said ok. let's do it your way. just a reasonable clean up and no frills. It went against my love for esthetics, He said lets sell it cheap and quick. take the profit and move on. Take emotion out of it. If they want glitz they can do that themselves. This is not a TV show. Its real life. Well, he was more than right, we purchased a house with a decent comp and to my surprise we made the same profit margin that we would have made if we did a full gut rehab and saved months of interest, labor, material and taxes. i guess I learned something new. You do not have to park your investment for a long time to make turn a profit. Just do a really good job of clean up and get the smells out, whatever that takes.
Did you see any change on the number of days on market for your flips?
Contractor · Glen Cove, NY · Member since 2016 · 209 posts · 89 votes
9y
Yes. since the house was a better value and a better price point we had more at the open house and 3 qualified bids. The shoppers want to do the work with their taste. Some were foreign and wanted to season it in their taste. After all it was their money and I was not living in the space. They were. I had no right to salt it my way. Many chefs do that. season it their way and get into trouble and go out of business. In my opinion, give them what they want. Make it clean and comfortable. Its their money they are spending. You can always sell them a full blown rehab after they purchase the house, the way THEY like it. They can be part of the after sale Right?
Residential Real Estate Broker · Fort Gratiot, MI · Member since 2016 · 9 posts · 10 votes
9y
Nice rehab work Jon!
I think Nick is spot on...in this business you can do what works for you. And each deal will be different.
After doing lots of both major rehabs and minor spit and polish deals. I must say I make more money on the "spit and polish" deals (to me that means...carpet, paint, repairs, clean, light stage, sell!). I closely track the PL of every project and with major rehabs the holding time durring renovation and extra "suprises" seem to eat away at the bottom line. Costs that I think a lot of flippers may forget to include are: interest on money in play over time, property taxes, insurance, lawn or snow maintenance, utilties, risk for vandilism, loss of doing other deals if funds are limited and tided up....and your time!!! Managing a major rehab takes more of my time.
Just my experience would like to hear others as well! Keep up the awesome work Jon!
Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
9y
I agree with Nick that it's dictated by your area. I would usually go with higher end finishes to either match the competition or stand out from it, but if you are in an area where the higher price point won't be supported then you don't do it. That happens on occasion.
I also agree with Sid that there's something to be said for keeping things basic. Our very first flip a couple years ago was done pretty nicely...not super high end but good enough. We spent a chunk of money rebuilding, washing and repainting the brick exterior, and landscaping the yard. It took awhile but we finally got an overqualified buyer at our price point (home actually appraised for a good bit over) and I've driven by the house a few times since and she has completely redone the exterior and landscaping LOL. It actually looks amazing tbh. Anyway...I can only wonder if she's made similar alterations to the interior. Oh well.
And I agree with everyone that your remodel looks fantastic.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
9y
Many if not most of the Fortune 500 companies who sell to the public use branding and the quality of your rehabs is "your brand". With that in mind, I believe you are doing it right and the fact that you stated you have been successful at it tells me you should not change your strategy. I have flipped many many homes and I have always prided myself on the quality of my projects. In fact, I have had potential buyers go to my website and look at previous work, go into escrow and then tell me they did that which helped them make their decision. My branding and the quality of the design and work stands out above most other flippers. This enables me to get top dollar and sell quicker. Time is your enemy on a flip so doing the average remodel will likely get you average returns at best and increase your opportunity costs.
"If the wheel is not broken, don't fix it".
By the way, love your rehab work, very good designs!
Investor · Mechanicsburg, PA · Member since 2017 · 110 posts · 50 votes
9y
Absolutely agree with Will here. Even though I am starting out in this area, I am all about designing and making the things right so it enhances user experience. I guess it relates to what you are asking. Would you rather want to be recognized for your beautiful work or an average Joe.
I disagree with some of the members here who only want to get in to make quick money!
Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes
9y
Don't assume your taste is everyone's. As a realtor I have seen so many decor jobs painstakingly done by somebody's wife that were a total waste of money and ended up getting gutted upon closing.
You wan to rehab it enough to make it blank canvas for the new buyer to make their own. Light paint that's easy to change. Don't go for the custom turtle or whale tiles in the shower that you love that might strike someone else as cheesy. Or really expensive kitchen knobs. Or a tile pattern that's too busy and would be difficult to repair/replace.
Spend some money on the appliances, but don't go for the wine chiller in a beer neighborhood.
Make it clean and simple (think architecture magazines), make it work, and move the real estate.
Investor · Oneonta, NY · Member since 2015 · 57 posts · 27 votes
9y
I have a different prospective on branding. I don't brand any of my stuff. In single family the buyer isn't checking who the owner is and even if they do. Say they move the average of once every seven years. The odds of them finding, liking and buying their next house from me is almost zero. I work on the same type of houses, with the same finish qualities and prospective purchasers so I would not be any form of upgrade.
Contractor · Glen Cove, NY · Member since 2016 · 209 posts · 89 votes
9y
I found it interesting that in many flips that went through transformation and rehab of the seller that many potential buyers walked. How many buyers walk away from a totally rehabbed SFR because the selling price is just over inflated and the seller and potential buyer both lose. Over development by the seller just pushes the envelope of the flip to retail or over retail prices. This jeopardizes the potential flip and is an awful gamble. The buyer is seeking a bargain or a to make a good deal The seller forces a potential buyer to agree with the sellers vision and the buyer was turned off by the vision of the seller to have to pay for the sellers vision and does not want to pay for the sellers vision. Who's vision should dictate? The seller or the buyer and who should pay for the sellers taste? When I flip, I do not want resistance of the buyer. I want to flip ASAP and move on. If the potential buyer wants a color on the wall and not standard white that is there, then I paint it a color that they want. Why would I gamble with a color that could jeopardize the sale? If the seller likes what they have done then why not keep it themselves.