Questions on Level of Rehab on Lower End House

[Greg P.]

Hello, I am currently rehabbing a couple lower end houses where the ARV is $135k and $175k. There are a lot of iffy items like the siding that could be replaced, but "might" pass with it being painted. Most of the siding is good, but there are parts where there is rot. I'm wondering if I am going over board on these rehabs. For example, in this price point, I am doing granite counters, stainless steel appliances, gutters, asphalt driveways (most cases), new cabinets, recessed lighting, new baths, new trim and doors, and the list goes on. Typically they are gut rehabs and I am spending around $45-50k on each. The spread is ok, but getting thinner as the market has slowed down. Am I going over board on these rehabs in the 135k ARV mark? Is there anything I could to save costs or thoughts? Thanks.

[James Vermillion]

Greg P., it all depends on the market you are working in. Do the other properties in the same area and price range have granite counter-tops, recessed lighting, etc? Over-rehabbing can be a big problem and can eat into your profits, but doing it just a little bit can give you a big edge in selling quickly, you just have to find a balance. That said, $40-50K for a gut rehab with that level of improvement seems pretty good to me, but in a $135K property I would probably go with "stainless looking" appliances and would leave out the recessed lighting, unless of course those are standard in your area.