When looking for a return on your investment, keep these things in mind as you scour the market.
While location is key in almost any real estate transaction, that’s not all you should consider when purchasing a property you intend to “flip.” You need to examine the home room by room, looking for potential ways to make it marketable. “Flipping real estate is all about minimizing risk,” says Robin Mathis, a settlement attorney in Fairfax, VA, who flips homes with her husband, Mike Irvin. “It’s not something to go into lightly.” With that in mind, here are some details to mull over before you buy.
Just about every house-flip TV show will tell you that updated bathrooms and kitchens sell houses, but the less glamorous areas are just as important. “Things like electrical, plumbing, HVAC, foundation, roof, windows … these are the things that are more costly to fix or replace,” says Michael Hyne, who has flipped homes for sale in New Haven, CT. If most of these items aren’t in good condition, move on. “Nobody wants to buy a house with a crumbling foundation, even if [it] does have a brand-new kitchen,” he says.
It’s a space that will probably be used frequently. You’ll want to have the option to customize it to your clientele. “It helps to know what kinds of families live in the area so that you can tailor your future renovations to your potential buyers,” says Hyne. “You wouldn’t want to do a modern-style renovation and then realize your clients are elderly people looking for a more traditional setup.”
For flips, the kitchen is definitely the heart of the home. Mathis often takes a contractor or home inspector with her to tour properties to make sure her ideas are actually doable. “Non-load-bearing walls are easier and less expensive to remove,” says Hyne, so think about where it’s feasible to knock them out to make a space look and feel more open. Also, consider what can be saved or reused. After all, it’s much more cost-effective to refinish or repaint kitchen cabinets than to replace them.
“Most people want at least one and a half bathrooms, so think about where you can add one, even if it’s only a half-bath on the main floor,” says Hyne. Keep in mind that freshening up existing bathrooms doesn’t have to be costly. Simply changing the fixtures or other small elements may be all you need. “You can get a brand-new toilet for around $150, and it makes a huge difference,” says Mathis.
Finishing touches and small updates in foyers, dens, or living rooms can create clean lines (think moldings, light fixtures, and other details), and you may be able to do them inexpensively. “Take a look at what they’re doing in million-dollar homes and then figure out how you can duplicate that in your price range,” says Irvin. He also advises thinking about ways you can make a home unique, which is especially important if it’s in a development where most of the homes have a similar layout.
“Refinishing existing flooring is about a third of the cost of installing new,” says Hyne. So, don’t be afraid to peek under that carpet to see what magic (or deflating dose of reality) lies beneath. Use this same logic when looking at the home’s existing finishes. Can dated wallpaper be removed? Will a new coat of paint be a huge improvement? Neutral choices are better, as they allow the home to appeal to a larger pool of buyers.