Make it the nicest or cheapest house in the neighborhood?

Question

Hello BP fam, I am flipping a home in Albany GA this month. Its in the nicer Northwest area (Solid A/B neighborhood) of the city w good school zones. The average days on the market is 90-120days. Fairly slow but I have factored for it in my holding cost.

Question: Do I fix it to be the best property in the neighborhood w more modern upgrades or the cheapest and do the least? It has good equity so there's room to make both needed repairs and modern upgrades if I choose. Only I am not sure how much I should improve? So I am asking the more experienced flippers on their strategy when it come to how much to upgrade?

Here are the numbers:

House 1) Purchase $110kARV $198k Needed Repairs $10k (Fix garage door, broken fence, front porch tile, tile master bath)Additional Upgrades $20k (Upgrade dated kitchen with painted cabinets, new countertops, backsplash, appliances and flooring, upgrade stackstone fireplaces, increase size of master bath shower and upgrade with tile, laminate flooring throughout).

10k would make it the cheapest home for sale and $30 would make it the nicest home for sale. Which should I do?

Account Closed · Answer

@James Harris Fixing & Flipping is all about "turns", the number you can do in a year. (with minor exceptions for really smoking deals). Anyway, you won't be living there, so I always make it a touch better than average but not the best. I want it to present nicely, but I'm not going to "over do" the place. You should know at least two things: 1) the AVERAGE price people will pay for the neighborhood and 2) I forget the 2nd thing but it must have been important. So, oh yeah, the 2nd thing is to go to other "opens" to see what they are presenting in your price range. That is your competition. The Buyers will be seeing those other houses and you should too. I KNEW the 2nd thing was important, it just took a minute to think of it (I quit doing Flips about 10 years ago when I figured out how much more profitable doing "Subject To" and selling to Tenant Buyers is.)

Doug W. · Answer

I like to be above average. Meaning, I want my places to sell quickly so I don't want them priced at the very top of the neighborhood. I like to add some really nice touches that make my rehabs nicer than the comps yet still very competitively priced.

My assumption is that if a buyer sees 3 houses that are very similar in price, size, etc. I want them to want mine because I have nicer cabinets, counters, lighting, etc. compared to the others even if everything else is relatively the same.

I can justify the increase in my costs in part because it means (hopefully) less in holding costs. Assume that my holding costs are $2,000 per month. If I can sell one month faster by spending that $2k on upgrades then I will do it.

Brian Pulaski · Answer

I strive for the nicest with a price right in the neighborhoods sweet spot. I want the buyer to feel they got a great house at a great price, and me to feel like I made good money for what I put in. So far this has worked out!

MJ C. · Answer

@James Harris can you send me a pm please? I have a question :)

James H. · Answer

@Brian Pulaski, @Doug W. @MJC thanks for the feedback. If I move forward with flipping it I plan to repair it just above average to get it to sell more quickly. I like Doug W's justification above in regards to savings on the holding cost. My basic strategy is to buy and hold so I am also now contemplating renting or listing as a 2 year lease purchase. Any of you have experience with this? It's a good neighborhood for home ownership. If I go that route I will likely repair it moderately. Thank you all again for your input. Any other suggestion are greatly appreciated.

James H. · Answer

Ken Min thanks for the feedback! Both points are excellent. I have a good idea of what buyers are willing to pay based on recently sold comps. I plan to make mine a little above average to sell it more quickly. Per your advise I also have planned to see a few 'for sale' homes. I've seen quite a few online already but need to see them up close.

Being a buy and hold investor I'm very interested in tenant lease purchase programs and plan to research the pros and cons more fully. So any info on this you can provide would be great! Take care Ken!

And thanks again.

Make it the nicest or cheapest house in the neighborhood?

Make it the nicest or cheapest house in the neighborhood?

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