There is a certain level of creativity involved
The following article was provided by RCN Capital.
In the real estate investment space, there is no doubting the popularity of the fix and flip as a strategy for success. Although most investors are completing fix and flips, just about everyone is doing them differently. The uniqueness of this investment strategy is what intrigues investors and there is a level of creativity that keeps the work exciting.
A duplex in California may have a very different renovation budget than a single-family home in Georgia. While some properties require certain repairs in order to get put back on the market, other times investors have properties where there is more of a focus on adding luxurious amenities. There are also some projects where investors make repairs solely based on the “bang for your buck” motto. The final piece of the puzzle is staging the property to attract buyers once the renovations are complete. This article will cover the fix and flip process from start to finish including the best markets to invest in, the best renovations to take on, and what the best staging practices look like to secure that return on investment as quickly as possible.
Fix and flips markets that make the most sense (and dollars)
When it comes to selecting a market for a fix and flip project, there are two key metrics that investors should be considering. Return on investment (ROI) and gross profit are crucial to the bottom line of a fix and flip investor.
A recent article on Nasdaq.com broke down some of the best states to take on fix and flip investing. In their breakdown, the most popular states included Delaware, Maryland, and New Jersey. All three of these states were in the top five for average gross profit and ROI for 2022. Massachusetts cracked the top five for average gross profit and Pennsylvania was number two on the ROI list coming in at 75.2%.
“Notice that all of these states are in not only the same general region (mid-Atlantic or Northeast) but also generally higher-cost real estate markets. Think of it this way: All other factors being equal, it's easier to earn a $100,000 profit when flipping a $1 million house than a $250,000 house,” writes Matthew Frankel.
Location and property values can be just as important as the repairs themselves. Finding these areas and capitalizing with as many projects in a specific zip code are how most savvy fix and flip investors operate.
Renovations that work for every property
When making renovations to a fix and flip property, investors have to keep in mind that it is much different than remodeling a primary home not used for investment purposes. In these situations, not everything may need to be replaced. Investors will not want to buy the most expensive upgrades either to keep their profit intact. Two key words to keep in mind that will appeal to the majority of buyers post-renovation are modern and neutral.
Keeping renovations neutral will apply mostly to painting. Giving the inside of the property a facelift with a new coat of paint in the kitchen, living room and bedrooms is a big step in the right direction if it is done correctly. Be sure to pick colors that plenty of buyers will appreciate. Having a potential buyer love a home but then get to a pivotal point such as the bedroom and be unhappy with the paint color would be a major letdown for an investor looking to sell. Whites and off-whites are usually the safest choices, but other acceptable options include soft greys, blues, yellows, and greens. Veering away from white can be riskier, but with these soft colors they remain closer to neutral and keep the brightness of the room at an acceptable level.
The same can be said for the kitchen and living rooms. The whites and off-whites play really well during showings and the ability to add light to the room with the color of the paint is a big bonus that investors can use to their advantage. These light and inviting tones entice buyers to act quickly and in the back of their minds they are thinking less work for them once they purchase the property.
Much like neutral paint colors, modern light fixtures and appliances can go a long way as well to securing interested buyers at a much faster pace. The more modern an appliance or fixture is, the longer the homeowner can go without making any updates of their own. Buyers don’t always go into a house expecting to critique something as minimal as light fixtures, but once they see a sleek, modern-looking fixture they get excited about the little things and notice them more throughout the viewing. Other renovations such as brand-new appliances which include ovens, microwaves, refrigerators, and dishwashers are a nice touch as well and never fail to impress potential buyers.
Modern and neutral renovations are about appealing to the masses. Paint and light fixtures can be inexpensive and while it is true, top of the line appliances can get pricy, it can also lead to more people wanting to buy. These bidding wars to secure the investor’s newly renovated property can make up for spending a little bit more to freshen everything up and make the property truly feel brand new.
Setting up success with staging strategies
It is crucial that investors don’t get too locked into renovations that they forget about the staging of the property. A staged property allows potential buyers to better envision what the home could look like if they decided to buy it. If the property is not in pristine condition, it can sometimes render the work and renovations irrelevant.
First impressions mean everything, so while most of the renovations are done inside the home, an investor can’t forget about curb appeal. Having buyers pull up to a house with immaculate landscaping, freshly planted flowers and a power-washed house is exactly how investors should start the showing process for buyers.
Once the buyers are in the house, the onus is on the investor and realtor to devise a game plan of how they want the showing to go. Highlighting rooms with the highest return on investment is an important start. Having buyers spend the most time in the kitchen and living rooms and speaking on the new appliances, the neutral paint and how well the lighting compliments the house’s set up are all keys to a good showing. When investors are staging the property, they should be making sure the rooms are clean, the house smells nice, and rooms are organized in a manner that allows for flow and easy movement throughout the house.
Lastly, when staging the property, it is important to have that “wow” factor moment for potential buyers. Whether that’s a porch area with a nice view, a beautiful fire pit/pool combo or a finished basement with amenities, make sure throughout the staging and showing process that there is that opportunity to impress buyers.
Turning a plan into profit
With the where and how locked down, investors should be taking advantage of a fix and flip strategy. It is always a viable option to achieve success in the real estate investment space. To put these plans into action, investors should always remember who can help them turn these plans into profits as quickly as possible. Lenders such as RCN Capital, which are geared towards working with and for investors are always a key piece to this fix and flip puzzle. With guidelines and loan programs designed specifically for investors to able to scale quickly, lenders can be an investor’s best friend.
Reach out to RCN Capital if you have any questions regarding the fix and flip strategy and the best way to capitalize on it heading into 2024.
