Best way to increase value

18 Replies

I just got a house for $120,000. it will be worth $240,000 minimum when I'm done and go to sell it. What are some ways that I can increase the resale on it other than updating kitchen and baths. $240,000 would be the low end of the neighborhood and I would like to sell closer to $260,000.

Austin,
The biggest concer you should have is getting a bank to agree to the huge jump in value without something major to justify it.

I would look at all of your comps and see what an extra bedroom would do for you, or an extra bath? Just by simply remodeling, it will increase marketablity more than it will value. :mrgreen:

Easy....wait 5 years for real estate to recover. Then you can sell it for $260,000

I am by far not as wise as most on this site (yet lol) but open floor plans, good landscaping, master suite with walk ins are always a good way to go from what I understand. You already mentioned the 2 most obvious. If I am incorrect with any of my suggestions, I ask that you share what I am looking at wrong so I know for my own projects.

Austin,

IMO, you will have to do some really good digging on the comps. Like Rob said, the marketability will increase but "tricking" out a house doesn't necessarily get you the price you want.

Why did those houses sell at $260? Was it also about supply and demand? Maybe they didn't have a lot of competition when they sold?

I don't know if you have done this already but I would find the agent that sells the most in that neighborhood and see what they say. It pays to really know the market before you make remodeling choices.

Originally posted by Austin Phillips:
It will be worth $240,000 minimum when I'm done and go to sell it.

What do you plan on doing to it other than rehabbing?

Aaron, you asked:

What do you plan on doing to it other than rehabbing?

Isn't that what he is asking us? Namely, besides the "typical" rehab, isn't he asking the rest of us what else might he do? He mentioned selling it three times. What else could he possibly do but rehab it if he intends to sell it?

Otherwise, Kathy and Sherry's advice seem sound. Know what pays off remodeling/wise in that area so that you don't miss what is important in the local market as well as paying for something that will give you small returns.

It can even come done to what is the "favorite" type of wood for the kitchens; a lighter maple or a darker cherry? How important/not important are kitchen islands? How necessary will well designed recessed and under cabinet lighting be for a great kitchen in that local market? Do your research.

Austin,

I am a little confused by what you are asking, but there are many ways to improve value besides kitchen and bath:
- landscaping
- new windows
- flooring throughout
- trim/molding throughout
- new roof if needed
- improved light fixtures throughout
- add/remove walls to make better use of space if needed
- add built in bookshelves
- repaint the outside/shutters
- increase energy efficiency

Those are just a few things and what to do will of course depend on the comps in that area and what is selling.

We are talking about resale at 2x purchase price. You have to alter the bedroom/bath ratio or add something to move the house up to what the $260k range. Just rehabbing isn't going to do it. You increase the marketability but not the price.

Austin,

how did you get the house half of what its worth? are there major problems that need to be repaired? is it located in a very slow market and not much demand? what are the current problems with the house.

as for reselling at 50% higher or your purchase price, you will have to be cautious that if you have financing on table you will have a tough situation as justification as for the 50% mark up

Originally posted by Austin Phillips:
it will be worth $240,000 minimum when I'm done and go to sell it.

If you don't know what you plan to do to it, how could you possibly know how much it will be worth when you're done? :D

good replies, I am facing the same problem recently.

Originally posted by Austin Phillips:
it will be worth $240,000 minimum when I'm done and go to sell it. What are some ways that I can increase the resale on it other than updating kitchen and baths. $240,000 would be the low end of the neighborhood and I would like to sell closer to $260,000.

Take a really good look at the actives, pendings and sold comparables, drive by them, go inside, check out the area, etc. Look at how long did it take for that 240k house to sell over the 260k, etc. If the 260K house had a nice rehab but took over 150+ days to sell, is that how long you want to hold on to your flip to get the 260k?

Before you spend a ton of money on upgrades, make sure you know what type of area you're buying your rehab in. You don't want to over spend on granite counter tops or travertine flooring if the area only supports average style upgrades.

Who is your end buyer for this type of property? First time buyer vs. move up buyer... Move-up buyer will know exactly what they want and will demand a better quality rehab. Does your property have any functional problems? That 1/2 bath could be converted into a full bath and bring you more value? You get the point.

Originally posted by J Scott:
Originally posted by Austin Phillips:
it will be worth $240,000 minimum when I'm done and go to sell it.

If you don't know what you plan to do to it, how could you possibly know how much it will be worth when you're done? :D

This is what I was going to say but could not come up with a good way to say it. If you know the ARV, you should know what you need to do with the property to get it there.

I got the house at an auction with no minimum. As far as why it only went for $120,000 is beyond me (maybe not enough marketing for the auction?). It's a 4 bedroom/3 bath house. I think if they just put it up for sale, it would have gone for around $200,000 at least because it doesn't have any major issues. It's just never been updated. Basically I was just wondering what are some things I could do to it without doing too much and not maxing out my ROI. I've flipped many houses in the past, but they have all been starter homes. This is my first move-up house like Silvio was saying. But I guess I didn't make myself very clear because I guess it seems like i don't really know what I'm doing to the house, which I do. Doing a more expensive house is just new to me and I figured you go about it a little differently than a first time buyer house. I just don't want to get caught doing some upgrades that I feel will go with the neighborhood, when in fact they aren't adding any real value to the house.

Originally posted by Austin Phillips:

...what are some things I could do to it without doing too much and not maxing out my ROI.

...I've flipped many houses in the past..Doing a more expensive house is just new to me and I figured you go about it a little differently than a first time buyer house. I just don't want to get caught doing some upgrades that I feel will go with the neighborhood, when in fact they aren't adding any real value to the house.

You DO want to maximize your ROI by minimizing your expenses. If you have flipped many houses in the past, and you have read all replies to your original post, I don't really understand why you are still not sure what to do, its a little odd.

If your AVR is correct, and you paid cash, and your rehab is about 30K and you end up selling at $240k you will probably make about 70k, that sounds pretty good to me... I would do what it takes to sell that house pretty quick.

I'm probably repeating something that someone else has already said but study the market. What did the person who sold at $240k have- Did they have granite, did they have hardwood floor, did they have cermaic tile in bathrooms and new vanity with granite tops- Thats the first thing you need to do.

You need to know where you need to be to accomplish $260k- obviously the way your house is now does not accomplish $260k.
So for example if the house that sold for 240k took 150 days to sell but had regular countertops put granite instead. If they had engineered hardwood put real hardwood, You want to be the best property period.

Our rehab we just did-there was a house in our subdivision that did just like we did- granite counter tops, ceramic tile- the house didn't look like ours because we all have diffrent tastes however ours was the best rehab- we got 4 offers in the first week while that house sat on the market for 60+days during the summer. It got a contract like maybe a day or so after we accepted one.
The point I'm making for all this is to say- Make your rehab the best one on the market. If you do enough of an upgrade to bathrooms, kitchen and overall house it should come in at or close to value if you've got the comps to support it.

If you have flipped many houses in the past, and you have read all replies to your original post, I don't really understand why you are still not sure what to do, its a little odd.

Silvio, if he's accustomed to dealing with 1st time buyers and starter's homes and now he's in a new market (where 1st time home buyers don't exists), then I can see why he's not sure what to do to the house.

HOWEVER Austin, I'm not sure if you want to jump into a new market without doing your homework. Ophelia took the words right out of my mouth. Look at the sold comps and see what features they had that sold the homes.

I'm a liitle more concerned about the fact that the house was never updated. When was it built?

I am going to assume you know what you are doing in a "vanilla" rehab with your stated experience. I think you are asking about how to make your project pop. I like to use things that are unusual; like built in ironing boards, a cabinet over the washer and dryer, recessed lighting, tile back splashes, ETC.
I remember the last place I sold, the appraiser stated that he was "wowed" because he was ecpecting the typical rehab in the area. But, I lost my fanny on that one too. Be warned.
Don

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