If I had all the money and time in the world, my every flip would be a lap of luxury. Unfortunately, that is not the case. As developers, we always have to be thoughtful about how a renovation affect the budget, timeline, and overall value of our finished property. Here are three things I consider (and you should consider too) when deciding what upgrades to take on.
Neighborhood. If you’re wondering whether or not an upgrade is worth it, talk to a real estate agent about the surrounding neighborhood. How much are neighboring houses worth/selling for? Then, think: How much will you need to raise the selling price on your property in order to cover the upgrade? If your bright idea takes the property out of the neighborhood price range, go back to the drawing board.
Time. Time is money in the real estate business. The longer you work on a flip property, the more you’ll spend in carrying costs (which I’ve blogged a little more about here). You should also factor in the seasonality of your particular housing market. Properties sell all year long, but some markets have slow periods. If you are feeling the pressure to get your space on the market within the the “high season”, the last thing you want to do is extend the renovation timeline with a project that won’t yield a return.
Practicality. Bells and whistles add originality and interest to a property, but they don’t always add value in every neighborhood and at every price point. Keep it simple: Make improvements that contribute to your property’s longevity, timelessness, and selling price.
Personal Anecdote: I am obsessed with hardwood floors. For me, nothing is more timeless, gorgeous, or distinguishing in a home. So, when my team and I pulled up the bedroom carpeting in my very first flip and discovered century-old oak flooring, I was beside myself. With a little love, that hardwood would have been an incredible and impressive addition to the property. The problem, we soon realized, was that ”little bit of love” turned out be be more like $3500 and a week’s worth of patching, sanding, and refinishing.
In the end, I decided it was best to re-carpet the bedrooms and replace the laminate flooring in the 1st floor living areas with brand new oak hardwood flooring (which is an expectation of the neighborhood). While redoing all of the floors wouldn’t have added a great deal of cost, time, or superfluousness to the property, I realized I wanted to do the floors more for my own personal satisfaction than out of necessity. For this particular neighborhood, they typical buyer didn’t desire hardwood flooring in the bedrooms. Re-carpeting kept us on budget, on time, and hassle-free. The house sold shortly after we put it on the market. And those floors are still there, just waiting for the owner to discover them!
Moral of the story? Don’t spend money you can’t make back. You’ll thank yourself in the long run. Are there exceptions to that rule, you ask? Maybe. I’ve written about splurging to add luxe to a flip. Check it out.