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Rehabbing & House Flipping

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John Jack R.
  • Flipper/Rehabber
  • Las Vegas, NV
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121
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How much to spend on the Rehab of a Flip?

John Jack R.
  • Flipper/Rehabber
  • Las Vegas, NV
Posted Aug 5 2015, 21:41

I just spent the last two days in meetings with potential flippers and maybe guys who have flipped a few years ago and want back in, or perhaps some want to be flippers. I don't know. But here in Vegas everyone wants the $180,000 to $250,000 family house in a decent neighborhood that they can spend $10,000 on fixing up and in less than three weeks rehab it and sell it. Excuse me?

Okay I know that there was once a time when you could pick a deal up from the street, do a mop and glow, sloppy paint, cheap carpet, the cheapest granite in the world, keep everything original including the gold light fixtures and gold trim and sell and make money.

But like everything else, all good things or what seem to be good things, come to an end. The MLS is littered with mop and glow houses with more than 180 Days on Market by these get rich quick flip artists.

At the end of the day I believe that you still have to deliver VALUE. Which means making the home within reason, the best that it can be with attention to detail and giving the home creative fixtures and touches and finishes which the potential home buyer would not see anywhere else. This by the way, takes money, creativity and thought. More importantly thought and time. Personally, I could and would never do, a mop and glow. Where is the value creation in that?

Hey when I sell a house and its a skinny deal at least I know that the buyer is now living in an awesome home that I, my crew, and the new owner can be proud of. One thing that I can say, is that even if I go over budget, our flips sell fast! And we get top dollar. There is still the balancing act of price versus appraisal versus what we have in the project. 

I am not sure about other parts of the country, but Las Vegas is notorious for people spending zero dollars on their homes after they buy them. Good News for me, because the 1988 Family House still has the same white tile counter top. Plastic one piece bathrooms with tub and shower, original carpet and tile and thirty year old toilets, sinks and water stops. Which by the way in our rehabs are completely replaced.

Why would you rehab a $300,000 house and not put in a new toilet? What the $98 is going to break you? Yet I see it all of the time. And then you wonder how come it's not selling?

So, if you really believe that you can rehab a 1900 square foot family home with $10,000 dream on, but people do and it's always, what I call a basic mop and glow.

To make a point, I took a 1292 square foot cement brick (built 1964) house in a predominately working class neighborhood. We had purchased it for $90,000 last year, and it was a cash flow rental. When the tenant moved out, at the end of May 2015, we decided to rehab and flip it.  So we spent about $18,700 which included a new roof (that's another story). My partner kept saying this should only be an $8000 rehab!! We started the rehab in third week of June, finished the last week of July and went on the market that same week on July 29th. We always pay to conduct our own post rehab appraisal. The appraisal came in at $140,000 and the house just went under contract on August 3, 2015 for $143,000.

At the end of the day this rehab came in at about $15 a foot. So I have two questions;

1. What is the best formulation for rehab estimate?

2. Should you not have enough upside in the deal do to more that a mop and glow? In another words if you cannot deliver a value product why even do the deal?

3. What are your thoughts on quality versus profit or no profit?

I have attached the final virtual tour so that you see the final product. I should really post some before picture so you see what it looked like before.

Anyway I would like to hear your input on the questions I posed and also please let me know your thoughts on the project. Just click on the virtual tour below. Thanks :)

Nebraska Virtual Tour

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