Smartly managing a rehab budget is critical to maximizing the return when flipping a property. Money should be spent on areas that most impress home buyers. Budget management is a zero-sum game. If money is wasted in the wrong places, there won’t be wiggle room in the budget to invest in the repairs and refreshes that increase the home’s resale price.
A home has three main areas where prospective buyers expect to be wowed. First is the ever-important curb appeal. Second and third are kitchens and bathrooms.
The baseline requirement for ensuring excellent curb appeal is making sure the outside of the house is clean and not in obvious disrepair. An outside clean may require pressure washing, cleaning or replacing gutters, or fixing any peeling paint or buckling siding. Make sure the driveway is in good shape.
Healthy, beautiful landscaping always makes a strong impression. Get rid of any plants that are dying. Adding plants that have some color creates visual interest. Repainting the front door and/or trim in contrasting neutral color adds a welcoming tone to the home.
If the front step or path are beat up, it may be worthwhile to lay down new stones or tiles. Replacing the front path doesn’t have to be expensive, and it spruces up the entrance setting. A simple garden statue or inserting solar lights along the front path are low-cost options to add some personality to the front of the house.
Last, look at the outdoor fixtures like a door handle, knocker, and mailbox. They may need a good cleaning, or they’re another opportunity low-cost opportunity to freshen up the look of the house.
The key to presenting an impressive kitchen is new appliances. Appliances provide some of the highest ROI in the resale price relative to their cost. Brand new appliances invariably make the kitchen feel expensive. Replacing backsplashes and cabinet fronts are also high-impact changes.
The same principle applies to upgrading bathrooms. New plumbing fixtures and vanities impart a sense of fresh modernity at proportionately low expense. When selecting a new vanity, look for good storage design as well as aesthetics. Buyers want storage. Flattering lighting and new, spotless tiling in the shower puts the finish on a bathroom that carries more than its weight in boosting resale value.
A dingy-looking exterior, kitchen or bathroom can wreck the presentation of the house. All three areas deserve a good portion of the rehab budget and attention.
Improving elements in the bathrooms is another key upgrade to focus on. First, focus on cosmetic improvements such as vanities and countertops. Once you’ve added a few updates, hone in on the plumbing. Although not cosmetic, plumbing fixtures that have been improved or replaced can make a significant impact for potential buyers.
The following guidelines are best practices to keep in mind when deciding what patch, repair, or replace:
Let potential buyers know what’s been done
Losing control of the rehab budget is the surest way to shrink the profit margin on a flipping a house. Misusing the rehab budget can be equally disastrous. The numbers may be in budget, but there’s still no real value invested in the property if significant repairs and replacements haven’t been made.
A post-rehab, pre-sale inspection report will let potential buyers know exactly what’s been done. Reviewing the inspection report with a potential buyer is a logical time to address and clarify how the changes made and not made have already been priced into asking price.
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Bay Mountain Capital has been in business for more than a decade, closing approximately 2,000 loans over that time period. We specialize in financing all types of residential and commercial property investments throughout Texas. Using a common sense and value added approach, we strive to incorporate these principles into our underwriting and closing processes. We are a Dallas Hard Money Lender, but we do business in Austin, Houston and beyond!
As a direct lender, Bay Mountain Capital can close a loan within one day after receiving clear title and a complete file. The process generally takes from two to three weeks, but can be accelerated where circumstances require it.
We are an asset-based lender, which means that qualification requirements are limited. Our rates and fees are among the lowest in the industry.