Bare minimum work with max roi?

Question

I am getting ready to start my first fix and flip. I have a decent background of remodeling and I have a problem with perfectionism. I take great pride in my work so I want it to be top quality. This somewhat goes against the fix and flip mentality from what I can tell. Not that the work I would do would be poor quality, but it's obvious doing the minimum possible while maximizing profit is the strategy.

I realize each home is different, but I'm hoping to get some objective advice on the optimal fixes to make the most profit. The property is only $110,000 and my budget is about $7K. I know I need to paint the whole thing and put some nice floor coverings, I also need new countertops and appliances in the kitchen.

The only way I can describe the property is "frankenstein". It's in decent shape, but every room is painted different, different doors, different fixtures, even different outlet faceplates. It like the last 4 homeowners each took a room and did each entirely different.

My temptation is to make the home flow better by making all the fixtures, faceplates, paint, doors and door hardware the same. I also want to go for soffit and fascia on the outside. I'm hoping some of the more experienced rehabbers could offer some advice. I'm afraid my perfectionism could make my first experience a bad one.

Thanks,
Justin

Glenn Espinosa · Answer

Justin Atkinson - While I totally understand the "if it doesn't add value, don't do it" approach that a lot of rehabbers take - At some point you also have to consider your company's brand and image.

In my market, I can sometimes walk into a rehab and know immediately what company did the flip just by the what fixtures they chose to use or even what air freshener they sprayed around. Realtors will know also and if your company has a good image and track record, they might just be that more motivated to show your house first.

So while others might harp on not wasting money on small things that don't add direct value like door knobs, outlets, light fixtures, etc. I look at it as a bigger picture sort of thing. Sometimes its the small things that the home buyers notice. And sometimes its the quality of your company's brand that provides the peace of mind a home buyer needs when choosing between your house and the competitors.

Just my two cents.

Glenn

Justin Atkinson · Answer

I am so impressed. I have posted in forums for years and I have never come across such a good group of people. No attitude, just helpful and thorough advice. What a great forum.

Randy - I really appreciate your response. It is dead on to how I am feeling right now. I know I've got to put myself into this thing or I won't enjoy it. I am working on putting together my scope right now. I think this will help me stay focused. I love the stand back advice. I think this alone will help me tremendously as I go through this project. Thanks again

J Scott - Sounds like your approach is what I want to do with this project. I can't stand lack of uniformity and I think this is probably the most unrealized aspect of curb appeal. You can always pinpoint details you like, but the "vibe" (for lack of a better term) of the home I think is a huge selling point.

So my next questions. I should probably start a new post, but both of you seem to have a lot of experience. How do you find properties that have a good spread? This one is HUD and we've looked at short sales. It seems that all have a very tight margin for profit and the competition seems fierce. Any other suggestions on places to look? My budget is way too tight right now to do everything I want/should do to completely rehab this property, but this is the best one that has come up for months. Also, do you think it's a good idea to get my real estate license? Seems like one of the biggest expenses is that 6%.

Thanks,
Justin

J Scott · Answer

I'm a big fan of full cosmetic rehabs that bring the house together and make it uniform throughout.  For nearly all my rehabs, the minimum I do is:

-  Paint (Interior and Exterior)
-  New Flooring
-  New Cabinets
-  New Countertops
-  New Appliances
-  New Light Fixtures
-  New Plumbing Fixtures
-  New Outlets/Switches/Registers

I do all this because it makes the entire house look new, and there will be nothing standing out screaming "OLD!" (which makes the potential buyer what else was skimped on or missed).

For a typical full cosmetic rehab, I'll spend $15-20K.

Randy F. · Answer

I can relate, Justin! There are many that will tell you its all about the money, but you wont be happy unless you put yourself into your projects. I dont know how much experience you have but if you havent already, you WILL eventually learn that quality doesnt have to cost more or even take more time. It takes being very organized and focused on your VERY detailed scope. If your scope is detailed enough, you can do a take-off from it that gives you a materials list and a schedule. You will have thought thru every task, start to finish and in order. If you follow the schedule youll be in good shape and the process will in itself become a driver. I enjoy seeing how close I can come to my labor estimates.

I worked for YEARS without tracking my jobs adequately, and I continued to be surprised at how much longer things took than I anticipated. I chaulked it up to... "Im all about the work". But, my pride didnt pay the bills. I will still take less profit at times so that I can just do it the way I want it, but satisfaction found in happy homeowners and buyers is worth A LOT!

Just remember that you cant turn an outhouse into a cathedral. Dont get too caught up in one detail. Stand back and have a look at the big picture. Often! You'll do great!