Rehab items/strategies to maximize ARV
Hello, I recently closed on my first (duplex) property to BRRRR. The property is in decent shape and requires medium rehab. As a newbie to this, I'd like to know what are some ‘typical' rehab items/strategy to maximize ARV while keeping the rehab cost low. Any advice from investors and contractors would be greatly appreciated. Thank you in advance.
#2 Starting Out Contributor
- Investor
- Austin, TX
This is something that differs market to market. Your finishes, and level of rehab should mimic what other properties have done that have sold for top ARV.
Quote from @Satish L.:
Hello, I recently closed on my first (duplex) property to BRRRR. The property is in decent shape and requires medium rehab. As a newbie to this, I'd like to know what are some ‘typical' rehab items/strategy to maximize ARV while keeping the rehab cost low. Any advice from investors and contractors would be greatly appreciated. Thank you in advance.
@Satish L.if you are purchasing a property to BRRRR you should be aware of the market your investment is in. You should know what the comps are in the area, what the cost of rehab/updates is....are you trying to do this all alone or do you have team in place? If you have a team in place they should be able to point you in the right direction on what should be done to maximize the ARV. What zip code of Cleveland did you purchase in?
Hi Satish,
You should be reviewing what you can do to update the kitchen first. Then determine if you can add any extra rooms. Try to find ways to get your duplex to conform to what is selling well in the area. A coat of paint goes a long way. A light amount of landscaping can help you sell the house as well.
It's been mentioned above, but getting the kitchens and bathrooms to market shape is a big one. Keep in mind if you're BRRR'ing it, you don't want to go too nice here, but just make sure it's tenant-proof whatever you do. Another one is finding ways to maximize bathroom counts and bedroom counts. I have a client where we were able to a large pantry in a half bath and add two bedrooms to an attic turning a 3/1 into a 5/1.5. increasing back end sales prices, and raising gross rents by a few hundred dollars.
Very general question so difficult to provide precise answers.
First, maximizing ARV: Knowing the market conditions and competition is crucial. Having your finishes at or slightly above the competition will do well in most cases. Ability to add a bedroom or bathroom is a great way to increase value. Adding square footage (addition) is another great way to add value so long as your existing market conditions pencil out that the cost of construction is at a rate below the price per sf of the resale value. Curb appeal is one of the best money making things you can do that is often overlooked and rarely talked about. The front of the home and the yard is the first thing potential buyers see which is their first impression. Fail at that and you miss opportunity for higher resale values. Same goes for the back yard too.
Kitchens and bathrooms are also high on the list of money making upgrades as is paint and flooring. Doors (or even just new door hardware) can also add value with minimal costs as these are things buyers see and touch as opposed to insulation, roof, etc. that are hidden.
Keeping your rehab costs low: The number one way for this is experience and when you lack it, you just have to settle for lower profits at first until you have experience. Experience gives you contacts and better subs, contractors, and material providers. Experience also increases your buying power with material suppliers who can then offer you better discounts. The best way to lower your costs is time (time is your enemy on a flip). Often times, having bid A for $5k, and bid B for $4500, most choose $4500. But if bid B takes 2 weeks longer to complete than bid A, you probably lost more than $500 in holding costs (taxes, insurance, utilities, debt service, maintenance, etc). Once you work with sub contractors and contractors long enough, they too will also give you better deals for that work/loyalty. Lastly, having a good eye for design and picking lighting and plumbing fixtures that appease the masses and look expensive but are not expensive can help keep your costs down while improving the ARV.
One last thought, ability to edit the floor plan to a more open floor plan is very beneficial in most real estate markets these days so finding ways to improve layouts is a key factor. A recent flip I completed did not have a true master bath in the primary bedroom and the tiniest of secondary bathrooms imaginable so by editing the layout and repositioning doors/walls, etc, I was able to deliver a full 2 baths with a true master bed/bath ensuite which adds a ton of value in my market and set my home apart from the others for maximum profits.
#3 Buying & Selling Real Estate Discussion Contributor
Quote from @Satish L.:
Hello, I recently closed on my first (duplex) property to BRRRR. The property is in decent shape and requires medium rehab. As a newbie to this, I'd like to know what are some ‘typical' rehab items/strategy to maximize ARV while keeping the rehab cost low. Any advice from investors and contractors would be greatly appreciated. Thank you in advance.
to keep the rehab cost low is to outsource all job to single contractor so their profit is good enough that he can give discount to you in other aspect. For example your cost perhaps higher if you do floor with A, lighting with B and bathroom with C.
My typical rehab is change the whole LVP, windows, recess lighting, popcorn removal, update kitchen, update bathroom vanity's and flooring and toilet of corse.
Quote from @Satish L.:
Hello, I recently closed on my first (duplex) property to BRRRR. The property is in decent shape and requires medium rehab. As a newbie to this, I'd like to know what are some ‘typical' rehab items/strategy to maximize ARV while keeping the rehab cost low. Any advice from investors and contractors would be greatly appreciated. Thank you in advance.
Roof, windows and siding