The "Bang for the Buck" factor in Renovating

[lightning]

Being that there are a lot real-estate investors on this board as well as guys looking to get started in the business (like myself), I figured we could all benefit from a thread of this nature.

A mentor of mine used to constantly talk about the “Bang for the buck factorâ€. Meaning, what little things can you do for people that will entice them to buy from you over someone else, or more importantly, “Who is giving them the most for their moneyâ€?

In a real-estate market where homes for sale FAR out number the amount of eligible buyers, the presentation of your home when you throw a “FOR SALE†sign out front has gotta play a huge factor in the buyer’s perception of value.

Therefore, what little things do YOU do when selling a home that may not take much time or money to do, but always seem to help speed up your sale and on the best terms?

Do you install crown molding throughout the house? Replace kitchen countertop? Paint every room in the house as “neutral†as possible? Install ceiling fans? Give your bathrooms a minor facelift? (maybe new tile?). Do you replace carpeting, maybe install Pergo flooring? Do you re-face cabinets? Install new door hardware throughout the house? Maybe you install dimmer switches in a few rooms? Maybe you favor exterior “curb appeal†and concentrate a lot on landscaping/rock gardens, koi ponds, fresh paint/siding, etc. etc. etc.

Now, we all know that the key to making money when you flip a house or providing that appeal to your buyers may be a combination of A LOT of the things mentioned above. There will be a large amount of discretion about “what is needed†and what is preferred when fixing a house up, but just for kicks; lets say you buy a 3-bedroom home that you intend to flip, and you have given yourself a $5,000 “FIX-UP†budget to dress the place up. The home is in “decent†shape and doesn’t need a full re-hab or any major repairs (roof/furnace/AC/HW heater, etc.), but it is showing its age, and there are definitely things you can do to it to add “value†or appeal.

Where do YOU start? What renovations provide the most “bang for the buck†when you’re fixing a house up to sell, and what jobs would YOU recommend to others looking to get the most out of their money when flipping a house?

To the pros that may contribute to this one, thank you in advance for your insight!

 

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[rcardin]

Tile surround in the bath tubs and tile flooring also.
Refinish the tub(200.00 and 3 hours)
Tile in the kitchen
update vent-a-hood
update stove as needed
New deep kitchen sink
new paint(home depot navajo white) very neutral
All new fixtures on the sinks
New ceiling fans if needed
updated electronic thermostat
Blow new texture on walls and ceilings. This is what sets our rehabs apart from others. Minimal cost in materials/major increase in resale value.
2-3 flats of annuals in the front yard for curb appeal.

 

[lightning]

Tile surround in the bath tubs and tile flooring also.
Refinish the tub(200.00 and 3 hours)
Tile in the kitchen
update vent-a-hood
update stove as needed
New deep kitchen sink
new paint(home depot navajo white) very neutral
All new fixtures on the sinks
New ceiling fans if needed
updated electronic thermostat
Blow new texture on walls and ceilings. This is what sets our rehabs apart from others. Minimal cost in materials/major increase in resale value.
2-3 flats of annuals in the front yard for curb appeal.

Awesome post! Speed ++!!!! :icon_super:

 

[lightning]

Hmmm...with all of the talk of "bargain" real-estate investing lately, I had figured this thread would drum up a little more conversation.. :chatter:

Well, to add my own input to the thread;

I recently bought my very first investment property, and to "dress it up" before the tenants move in next month, we have undertaken ALOT of cosmetics. I am proud to say, that the property now looks MUCH better then it did the day we closed, and it is amazing just how much cosmetic appeal you can dig up with a few SIMPLE and cheap changes.

A few simple (and some VERY) simple things we did;

-We ripped down some VERY old and sagging crown molding in the living room, patched the holes in the sheetrock, sanded and painted it. Because the ceiling was a liiiiiitle wavy on one wall, we decided against putting new molding up (which only highlighted this problem). The difference with the fresh paint and the subtraction of that molding was night and day.

-Swapped out 2 VERY old light fixtures (original) for newer, more modern ones (classy and simple). The fixtures were $30 each (we're not talking huge, expensive chandeliers here), and took my buddy with very minor electrical know-how only 15 minutes each to swap. HUGE improvement over the dingy looking ones that were up there.

-We painted the ceilings in both the living room and dining room. The previous owners had obviously not undertaken it because painting ceilings is a big PITA!!! (lol). However, it tooks me and a friend only a few gallons of paint, 4 dropclothes and 2 hours to do it. The old ceilings were a pale pink color reminicent of something youd see in the 60's. Now, they are an off-white cream color, and the room looks 100% brighter.

-One of the bathrooms was very small, so we went all out in it and purchased clearanced marble tile in a cream/sandstone color from Home Depot for only $3.00 a tile (rather then ceramic) to give it the ultimate luxery appeal (because of the small square footage, we opted to go for a better tile). TIP: ALWAYS check the clearance sections in Home Depot and Lowes before purchasing! From working there for almost 3 years, I can tell you that ALOT of good material is heavily discounted, only because a department head wants to make room for a new pallet material in his aisle. The tile we picked up would have been about $7.00 a peice regularly, and we only needed 18-20 of em.

Along with a fresh coat of sage green paint and a few gold fixtures to offset it, the bathroom looks BEAUTIFUL, and it would appear as though we completely remodeled it. In actuality, the tile cost about $60 bucks, the paint and primer cost $40, and the new toilet paper holder, vanity hinges and drawer pulls cost $40 as well. Along with a few other changes (new trim molding, new door hardware), etc, the bathroom looks absolutely fantastic. It is important for me to note though, that I did have a friend install the tile at a VERY significant discount, as hiring someone to do it can get very pricey. (START NETWORKING WITH FRIENDS AND BUILD YOUR REAL-ESTATE TEAM NOW!!!) The money you can save when you know one of those "jack of all trade" type of guys is tremendous!!

-Replaced the dingy looking blinds in a few rooms with brand new white ones.

-Lots of other "detail" work, including new cabinet hardware here and there, new doorsets for 2 of the bedrooms, new shelves to replace the sagging pressboard they had used in a few hallway closets, new trim on a couple of door frames, new paint in some corners, on some moldings, etc. where the sellers "Half-assed" it, etc. etc. etc.

Overall, I really havent invested too much money yet (maybe $600 bucks in material and a few weekends of elbow grease).

Similar to the anology of not taking the time to wash a car and vacuum the interior before you sell it, it is AMAZING how some sellers will let their homes hit the market. Look for the properties that you can easily ADD value to by finding that diamond in the rough (good hardwoods under old carpet, a basement that can be easily refinished, landscaping that can turn around a houses curb appeal instantly, a kitchen that needs a minor facelift without being totally redone, etc. This is where you can make your money.

Good luck guys. :fastlane:

 

[PurEnergy]

Sell on TERMS!

 

[bflbob]

How about adding $6k to the asking price and offering "Free Utilities*" for a year?

*Limited to $500 per month.

 

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[lightning]

How about adding $6k to the asking price and offering "Free Utilities*" for a year?

*Limited to $500 per month.

I would think a cash incentive like that would definitely entice buyers a little more, and make a listing "stand out" more then usual! Another good idea would be to offer seller-paid closing costs, so that they could move into the home with very little cash out of pocket (say, up to $5,000).

Anyone else have any ideas or "musts" when you are renovating a place for a flip? Do you prefer medium-grade carpeting or pergo flooring to refinish a floor? Is it true that kitchens/baths generally bring the best ROI when youre trying to make a flip more attractive? (just trying to drum up a little more conversation here!! :jiggy: )

 

[^eagle^]

I would think a cash incentive like that would definitely entice buyers a little more, and make a listing "stand out" more then usual! Another good idea would be to offer seller-paid closing costs, so that they could move into the home with very little cash out of pocket (say, up to $5,000).

Anyone else have any ideas or "musts" when you are renovating a place for a flip? Do you prefer medium-grade carpeting or pergo flooring to refinish a floor? Is it true that kitchens/baths generally bring the best ROI when youre trying to make a flip more attractive? (just trying to drum up a little more conversation here!! :jiggy: )

I have been out making offers on REO's I am currently negotiating with a bank. I am offering thier asking price in return they pay ALL closing costs and prepaids including a home warranty. My first two offers were rejected but my current one is still in negotiation. They sent a counter that My agent and I line item vetoed and sent back.

There are programs that allow the seller to pay up to 6% of the purchase price in closing and prepaids. It's a great incentive for the buyer to pay a premium or at least asking price because ALL thier out of pocket goes to equity. I would only do this if I was a seller and the buyer was putting 10 percent down. Not a 3% FHA. Maybe you can do this as opposed to a sweat equity flip. I'm not sure if the numbers would work. Just throwing an idea out there.

 

[hakrjak]

I still invest heavily in Bathrooms and Kitchens... You always get your money back 5X fold. Brand new appliances, brand new toilet & pedestal sink, new ceramic tile -- People really love to see when they are strolling through a house.

- Hakrjak

 

[MJ DeMarco]

I've always believed curb-appeal/landscaping is one of the best bangs for the buck. The landscaping will deliver to its prospective buyers their *first impression* -- if buyers have a poor first impression, its takes a lot more to overcome it on the interior vs vice versa.

Here are some figures w/regard to what landscaping can return.

http://mioaklandcounty.com/blog/200...gh-return-on-investment-consider-landscaping/

 

[hakrjak]

I agree... Sod alone is a huge return, because you can buy 1,000 sq ft of it for $300 bucks, lay it yourself easily or hire a laborer for 8 hours for $80 -- and you've got gorgeous green grass. Who doesn't love to see that? And most buyers are ignorant of what such things cost, so they'll assume you spent thousands.

- Hakrjak

 

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[lightning]

Heres a great article about exactly what I was talking about (easy things you can do that are inexpensive, but that may give you a great ROI when you sell your house)

http://realestate.msn.com/Improve/Article_bankrate.aspx?cp-documentid=7413634&GT1=35000

I hope the article helps some of you!