If you're looking to become a savvy real estate investor, buying a home, fixing it up and selling it for a profit can be the way to go.
This process, which is known as home flipping, has grown in popularity in the U.S. Many television shows have portrayed how easy it can be to buy a run-down house, make a few creative changes and sell it for a much higher price than you paid. While there can be many financial benefits, flipping a property isn't as easy as buying a vacant home and spending a lot for renovations.
Whether you choose to hire professionals or use your own construction skills, you have to understand which upgrades actually give the home more value. Here are some fixes that don't do much for your profit:
- Large projects: In a smaller home with few rooms, it can be tempting to call up a couple contractors to get a quote for an addition. Indeed, more space nets a premium sale price, especially when adding bedrooms. Yet, you don't want to add so many rooms that you increase the price beyond the average for the neighborhood. Additionally, large projects like new rooms take more time and funding, and as the project timelines increases, the money you're putting into the home goes up. Keep this in mind when deciding whether the endeavor will pay off.
- High-maintenance upgrades: Swimming pools are often associated with luxury and a higher income status. Gardens appear as a relaxing and beautiful feature of the home's exterior. However, both represent a lot of regular maintenance for the buyer. Avoid renovations that make people think they'll have to spend time and money for upkeep.
- Unique features: Some buyers enjoy a nice glass of wine and a warm plate of Fettuccine Alfredo, but that doesn't mean every person who views the home will be excited about a built-in wine cooler and pasta arm attachment for the kitchen sink. Don't waste money on upgrades that won't appeal to a wide range of buyers.
- Hidden renovations: Of course, a well-insulated home is great, and you should get a home inspection to ensure your property is retaining heat during the winter. However, this benefit and others that cannot be seen by potential buyers aren't worth the investment unless there's a serious need for replacement.
Additional tips for selecting upgrades
There are many ways you can net a loss when flipping a house by spending money on unnecessary upgrades, and it is important that you research before swinging any hammers. Get to know your neighborhood. If the property you purchase has one or two fewer bedrooms than other houses that are for sale in the community, it could actually be beneficial to add more space.
If you can't decide where to start, always look to the kitchen and bathrooms first. When it comes to renovations that add value to a property, these two rooms are always at the top of the list. Unless you purchase a home that recently had some kitchen and bathroom work done, it's a good idea to spend some money in those areas. New cabinets and fixtures are typically attractive to buyers.
Finally, make sure that your money is in order. The entire home flipping process is expensive, as there are costs to buy the house, fix it up and sell it. Avoiding the unnecessary renovations can help you ensure that you stick to your budget and don't stretch your finances.