When evaluating finishings or additions to a property you are looking to rent what are some ways you determine what is going to provide the best return and what is just going to eat into your investment? Particularly when it comes to bathroom and kitchen renovations. Would love to hear how different investors run their cost benefit analysis.
@Matt Duckworth *flip (not rent)
Hey Matt, I have not flipped real estate but I do work in construction and am looking to eventually BRRR properties. In my opinion when flipping house cheap fixtures really degrade the overall look of a room especially if you update everything else. Again this is just my opinion when analyzing deals. But when looking at properties that someone has flipped it, and they put cheap fixtures and finishes in, what does that tell you about the rest of the construction that has taken place? I would suggest finding options that look nice, and are decent quality. This looks as though the people selling the house care more than just making a quick buck, and would like to turn out a decent product as well. Even if it means $100 light fixture instead of $20. Again this is just my opinion but I would love to hear your thoughts on this since you are actually doing the flip, especially because I hope to rehab my own properties in the future.
Your area will determine what grade finishes you should be installing for your flips. You never want to use items that are "cheap" looking as these items are what potential buyers see and touch. Quality is key. That said, you also do not need to overspend and buy a $1500 light fixture when a $500 one will be just fine. If all the other competition uses quartz counter tops in the kitchen, so should you. If everyone has carpet and vinyl flooring, then a laminate wood upgrade could provide that finishing touch that is better than the others without a major price increase to you.
This all becomes a happy balance between design and budget and that takes experience. Even if it costs you a chunk of your profits, investing in hiring a great person with tons of experience on finish selections for your flip could provide that insight you need for your next one.
I could not agree more with what @Will Barnard said above.
You always want to look at what others are doing in your neighborhood/area. I always analyze what my competition will be like at the end of the flip (active comps or active projects) and then look at what the comparable are (closed sales).
If for some reason you do not have any comps that have been updated or flipped in your area, look at what home builders in the area are doing for your same price range.
You will often see that someone tried to overdo a flip and put an expensive finish in a neighborhood where that may not add value. I am not saying that I do not advocate for good craftmanship and materials, but there is a point where you can go overboard and see no return on the additional investment. I think the most common place we see this is in the kitchen and baths with expensive countertops, over done tile showers and tile work in general.
Also to add what was mentioned above, we have found excellent designers that you can hire for an hourly rate, that in a short amount of time can basically design and pick out all of the supplies needed for the job. I HIGHLY recommend this type of service, it will save a ton of stress and time!
Your goal is to be just slightly better than your competition. Easier said than done.
Which is better: Granite countertop or tile in the bathrooms, roughly the same cost. That is an easier question compared to should you re-plum the house or upgrade the floors and kitchen?
Could you imagine if the attractive young family on a DIY show entered a home and went right past the farms sink to look under the basin. "Oh honey, look at the shiny new CPVC under the sink."
This part of the business is more art than science. It is really easy to over invest. People fall in love with their project and forget they will never live in the house.
The best advice is consider who will be living in the house and build to their expectations. Are the new owners professional, blue collar, do they have a lot of kids?
So far you are getting great advice. We flip in WA state where the market is hot and I have been challenging myself on what is good and what is over the top.
if you spend time searching Amazon, clearance sections, Ikea, & build relationships with vendors (my countertop Co) you can source current on trend finishes and not spend a ton.
I know we were debating pulling out & moving the door on a split master bath but the drywall repair relocating the wiring and the unknown we will run into we decided against.
People have a price range in mind when they tour your house I don't want them to find any negatives or concerns, and I want few wows that make them want to go to top of their range and want to go all in.
they don't walk around with a check list going oh I see this add 500 to the offer ohh they have this quality of tile add 1000 to offer. It's way more emotional than that. Feel free to email me with any specific questions.
@Matt Duckworth I always tell people that improving the lighting is a quick, inexpensive way to bring a unit a fresh look. I'm a big fan of canless recessed lights with options for changing color temperature. Getting these installed throughout can turn a dim dark place into "shiny and new" feeling.
As it relates to kitchens and baths, definitely look at your competition and go a step above if you can.