Rent vs Flip - How much it too much rehab on a C class property?

14 Replies

My wife and I bought our first investment property and on the fence about rent or flip, although we are leaning toward flip. The house is 858 sq ft in a C class neighborhood. What items would we want to upgrade to maximize the value of a C Class property?

 - Kitchen: Upgrade to Quartz countertop? stone/glass backsplash in kitchen or just paint?

- Ceramic tile in Kitchen and bath?

- Ceramic tiled shower enclosure or refinish the fiberlass already in there?

- High quality laminate floors or glue down solid wood?

- Central air or Mini-Split?

Comps support $85k - $99k and we bought for $40k. What would be considered overkill for a C class flip?

@Sean M.

Id check out your neighborhood’s marketed rentals through and zillow. See what your fellow investors are doing. I wouldnt over do it.

If market is saturated with rentals then id take it a step further meaning stainless steel appliances if competition has white or fans in the rooms instead of basic builder light. These are not expensive upgrades. Be mindful to not over upgrade. Big ticket items such as hvac i only replace if i need to. Water heater not rusted/20 years old? Keep it.

Congratulations on your property. Much success to you.

If you plan on renting, don’t skimp on the mechanicals, like HVAC, Plumbing...etc. You will save your self time, money and headaches.

 Not to mention, you won’t be a slum lord, renting a piece of crap dwelling, with non working AC, backed up pipes, with fancy blinds and counter tops.

I'd have to echo what the others say. Find out if you can what the neighborhood calls for. If granite counters and tile showers is not the norm, then there is no need to put in high end finishes. With C class properties, you will most likely cater to an investor and not a home owner. If there are lots of rentals in the area, then I would approach the rehab with that in mind.

For a $100k house I put the laminate countertops at Home Depot that kinda look like granite with a nice grey glass tile backsplash or white tile backsplash depending on cabinet color. Lvp flooring and cabinet pulls. Stainless steel appliances.

@Sean M.

I have crews doing rehabs in Kansas City for other investors as well as myself. And in this area the trend I'm seeing for rental properties is:

-LVP flooring

-if countertops do need replaced, do cheap laminate that looks like granite or quartz

-if there are tile backsplashes or on walls in bathrooms or kitchens, reglaze with porcelain enamel

-if wood floors, refinish them to look new

-get rid of old looking light fixtures and replace with brushed nickel

-repaint the whole house including cabinets

-get rid old old looking vanity tops. For smaller vanities it's usually best to just replace the whole vanity

-if toilet shows scum or the lid shows any form of wear replace it

-replace any mirrors or their hardware that do not look brand new

-be sure all windows function

-be sure all external doors are keyed the same

-new white vinyl cordless blinds throughout

The list is usually longer for complete rehabs, but hopefully you get the point. And many of these things don't take a ton of money. I tend to get above market rent for many of our properties simply because ours look much better than the others out there. And good tenants will be attracted to better looking properties. You'd be surprised how many people can afford higher rent but just can't find a good property. Hopefully this helps! Good luck!

If this is a flip at <$100K, use LVP in the wet areas, $2 carpet in the living/sleeping areas.  Tile backsplash, laminate counters, basic SS appliances, fresh paint and fixtures/hardware (if needed).  At this price point, you are going for clean and functional with some low cost sizzle (stainless appliances, cabinet hardware, mosaic or subway tile backsplash).  Don't overdo it or you are going to lose profits (i.e. do NOT use hardwoods or granite/quartz).  

Have the HVAC system cleaned and checked and keep the receipt for the new buyer - do not replace it just because it is old if it is properly functioning.  You are asking about central air vs. mini split...  Does this mean there is no existing air conditioning (or only window units)?  If there is ductwork and a furnace there now, install a central air unit.  In my area, mini splits are more common in apartments, they are not well received in houses - people expect central air.

@Sean M. Something else to consider is if there is even a large buyer pool for a flip given it is a C class area? There is a big difference between high C and low C areas. In addition to the sold price comps you mentioned, what are the days on market for an average sale in that area? Just something else to consider.

@Owen Dashner thanks Owen, that seems to be a consistent theme. There is no HVAC now only window units, the property was built in 1905. There are maybe 15-20% if the properties have HVAC, although the ones selling for $85-100k do have it, so I’ll bite the bullet there. Time one the market is about <60 days. Appreciate the feedback!

If this is your first property, it's very hard to not let your taste and what you would want in your personal home to creep into the scope of work. Your initial scope will most likely be too much. IMO you need to decide now if it will be a flip or rental. In my C class rentals, I do what @Oliver Sparks said. If you're going to flip, follow the other advice. Go view 5-10 similar for sale properties in the area. See what sold with what amenities. Mimic what works. Flips are going to sell based on comparables. Congratulations on your first property. Keep us posted on your progress. I wish you the best.