Rehab items for basic flip

[Chuck Brickman]

I'm trying to get a better idea of what I should replace and what I should just simply paint or otherwise update on basic flips...say ARV is going to be in the low 100s?

I've read that some guys go in and replace windows, vinyl flooring with tile, all bathroom fixtures, appliances, kitchen counter tops and fixtures, light fixtures, paint inside and out, roof (if needed) landscape etc. I guess my question is when your profit margin is somewhat limited by the ARV of the home what's your rule of thumb for determining what can or should be replaced or redone?

Thanks

[J Scott]

Personally, I like to ensure that every cosmetic item in the house is either brand new or looks brand new and is consistent throughout the house. The new fixtures and materials don't need to be high-end, but they need to be new. Additionally, I like to ensure that all mechanicals and high-ticket items are maintenanced.

The key is that if you replace some stuff and not other stuff, the old stuff will stand out and the buyer will wonder, "If they didn't do this, what else did they skip over that I might not know about?"

Also, I like to give my buyers my business card at closing and tell them that if they have any rehab issues in the first few months to call me. So, I like to ensure that anything that might be a problem for the buyer gets fixed during the rehab.

For me, this means:

- If the roof is more than about 18 years old (or if it's in bad shape), it will get replaced. Otherwise, my roofer will do a full maintenance, which includes fixing nail pops, replacing pipe boots, securing/cleaning gutters, repairing damaged flashing, etc.

- If the HVAC system is more than about 18 years old (or if it's in bad shape), it will get replaced. Otherwise, my HVAC company will do a full maintenance, check the condenser/coil, clean the furnace, check the ductwork, etc.

- I paint every house, interior and exterior (unless the exterior is brick). This includes trim, gutters, exterior doors and shutters.

- I will almost always replace all fans and light fixtures throughout the house;

- I will almost always replace all plumbing fixtures throughout the house;

- I will always put in new matching stainless steel appliances, including washer/dryer;

- I will almost always replace all flooring throughout the house (unless it's brand new carpet or hardwood/tile that is in great shape);

- I will often replace the kitchen cabinets, unless the existing ones are in pristine shape (in which case, I'll change the hardware to match the rest of the fixtures we use).

- I'm a lot more lenient on replacing bathroom vanities, but if there is any damage to them whatsoever, I'll replace them to match the kitchen cabinets. If I replace the cabinets/vanities, I'll always replace the sinks as well;

- I will almost always replace the front door;

- I will always replace any windows that are failed (fogged up);

- I will replace all doorknobs, outlets, switches, outlet covers, switch plates. I will replace registers and returns if necessary. I will ensure that there are battery-powered smoke alarms in pretty much every room. I put mini-blinds on every window;

- I will ensure the garage doors and remotes are in good condition and working properly;

- I always get the house professionally cleaned before staging.

Obviously, this means that I'll be spending more on rehab, and generally speaking, I'm not going to get back every dollar I spend on some things. But, I'm willing to trade off the loss of margin for getting a quick sale and a happy buyer, which will generally result in a higher ROI for me, both short-term and long-term.

This is also why I buy relatively few houses compared to what I'd like to buy. I'd love to flip 50 houses per year, but given my purchase/rehab criteria, I can pretty much only find 10-20 per year where the numbers work for me.

There are lots of ways of making money in this business...this is just what happens to work for me...