Hi @YiBing T.,
Congrats on your first BIG purchase! That being said, my first comment is you’re going about this the wrong way.
In general, when you buy a property to fix and flip, you have to have a sense of your numbers prior to the purchase. I don’t think it’s said enough, but you make your money on the purchase, not the sale.
The 3 most important numbers are:
1. Purchase price which you will determine from #2 and #3.
2. Cost of required renovations. Don’t over personalize as you’re not going to live there. The cost should already account for the types of finishes for flooring, cabinets, tile, etc otherwise you can’t possibly calculate what your renovations costs are. The materials need to match, or slightly be better than, what your competition is using. If most are putting down carpet, then Marble floors are definitely out of the question! LOL
3. ARV - what you will get when you sell the property.
The most important of these numbers is the ARV. It's based on comps and what the "market" is willing to pay for your house, not what you WANT to get for the house. Too many people buy a house for close to market price and think if they renovate for big dollars, they'll sell for way more then the competition.
Next, determine what it will take to renovate the property to make it sellable in your market compared to other properties. Remember, the house has to appraise right in order for the bank to lend to your buyer.
From that, you determine whether or not you can purchase it for a number that makes sense to you and the seller. I’d rather walk away from a deal then buy because “I think” I can make money at this price.
Once you determine the above and make the purchase with the price you are happy with, then you move forward on finishes. BUT, these finishes should be mostly determined during the budget phase PRIOR to buying the house. You don’t have to know exact products, but should have an idea of price per unit. For example, if you put $7 per square foot for flooring including installation in your budget, you can find great quality laminate flooring or low end tile.
By following this process, it’s hard to over renovate since you already know what your costs “should” be. I say should be because there are almost always surprises, and the bigger the house, the more expensive the surprises are. Mechanical is typically where the hidden problems are: HVAC, water heater, leaky plumbing, bad/outdated electrical, roof and windows.
During renovations, you follow the same process regardless of the size of the property. I prioritize as follows:
- Kitchen
- Bathrooms
- Master bedroom
- Adding value where/if possible. ie: adding additional bedroom within existing square footage. Add laundry room if there isn’t one. Depending on area, adding nice outdoor entertaining space.
- Common areas: living room, dining room, patios.
- Laundry room (if present)
One common thing I hear from people is “hey, there is money left in the budget, so let’s add.....”. If what you want to add doesn’t increase the selling price OR make the house sell much faster then your competition, don’t do it.
PRO TIP: add a contingency of 10-15% to your total budget for surprises. It’s only spent on things you didn’t count on such as the AC failed after you started renovations or you found dry rot or termites after you opened walls.
I hope I didn’t go way beyond you’re initial ask or offend you by assuming you’re totally new to this, but I hate to see people over develop a property accidentally because they didn’t properly evaluate their numbers.
