Full Gut or Basic Face Lift?

4 Replies

If you are looking for an investment property, what appeals to you most, a full-gut rehab or a basic "face-lift"?  Why?

We started out working with full-gut rehabs but noticed on these 100 year old Chicago homes, we run into so many more structural issues than we'd like to see. This in-turn takes longer and cost much more.  We recently have adapted to what we call, "lipstick rehabs."  These lipsticks include new flooring, counters, appliances, removal of one or two  non-structural walls, and  as much cosmetic fixes as we can do. This allows us to flip the property in roughly 30 days.

As an investor, what plan is most-appealing?

I'd say it depends on what you're into. Some people just love the idea of jumping in and completely transforming the house into something that's essentially brand-new. Others prefer to not get into that much work and like a quick-turn better. So I'd say it depends on where you find the most satisfaction. Having done both you ought to have a good basis for a decision as far as what you find more appealing.

Lipstick are my preference but they hardly exist anymore in the areas I farm  to turn the profit I require. Many homes in this category are being sold to owner occupied that renovate themselves.  

Might exist in S and W Suburbs as the housing stock is newer

Great question.  For us the answer lies in the financials & the bottom line potential Annual Return on Investment.  My assumption is your flipping these properties, not holding.  If a  "full gut" is purchased @ a low enough price there should be enough margin to afford let's say a $10K surprise & still make a mint.  If purchased @ the wrong price w/ skinny margins then there's trouble.  So we let the numbers do the talking.   

I'm with @John Weidner and @Crystal Smith  - although we've done a couple lipstick rehabs (in Chicago that amounts to $40-50k +) they're very hard to find so most are gut rehabs.  Even with a lipstick rehab stuff can go wrong so we always build in a contingency.

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