When investing in rehab properties, you often run into homes that are in really bad condition. These are the homes I love that are in complete disrepair, ugly and unlivable. To many this is a turnoff and says headaches. To rehab investors it says profits and the evaluation process begins. When creating your rehab list and budget, it is crucial to focus on completing Value Added Repairs. Items that add value usually have to do with Kitchens, Bathrooms and Curb Appeal.
It is key to get people to fall in love with your property and get emotionally attached. They must imagine themselves living in the home and it starts with the property being inviting when they first lay eyes on it. The first impression must be “WOW.” The home is inviting with nice landscape, fresh paint and some pop in the colors used. Sometimes it is as easy as adding a little paint and cleaning up the landscaping. Putting about 2K into Curb Appeal can often increase value significantly.
Then they enter and find warm neutral colors and new or at least nice flooring. But the Kitchen is usually the place they head. Women love kitchens and this will be a huge part in the purchase decision. Don’t overdo it though, putting in a 40K kitchen into a 100K home does not make sense. Spending 5K could with nice appliances can already get the buyers thinking about cooking and enjoying dinner with family and guests.
The 3rd part of the home where significant value can be added is the Bathrooms, especially the bath in the Master bedroom, the one the buyers will be using. They will instantly imagine using the bath and what it will be like to sleep, live and spend time in this Master bedroom and bathroom. Adding a bathroom or converting a half bath to a full bath can also add significant value to buyers with children.
Finally, the mechanics, plumbing, electrical, roof, foundation, etc must not create red flags during the inspection period. That can kill a deal really quick. It is important to not go overboard on items such as finishing a basement, materials that overshoot what is common and expected in the neighborhood and doing any upgrades that will not add value. If you ask yourself, will the $ I am spending on this repair add value to the sales price? If not, save the money. Focus on Value Added Repairs with Kitchens Bathrroms and Curb Appeal.
Rent and hold properties you really want to keep it cheap and simple. It has to be rentable so the answer has to be Yes if you ask yourself if repairs will increase rent and keep the tenants around.
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