When you’re looking to maximize the resale value of your fix and flip property, you want to make sure you’re putting your money into the right places. Not all renovations are created equal in terms of the amount of value they add to the home’s ultimate resale price. Some renovations end up being too grand and prices out potential buyers, leaving your house on the market longer than you’d like or forcing you to take a financial hit in order to sell. Other renovations end up being more complicated than expected and force you to spend more time paying your carrying costs than you planned, eating in to your total profits. Based on the numbers, we found three of the best cost-to-value renovations to help real estate investors maximize their fix and flip profits.

Minor Bathroom Remodeling

One of the best cost-to-value renovations you can make is remodeling the bathroom. According to Drury Designs via HGTV, you can replace the tub, toilet, sink, floor, vanity, and fixtures for around $10,500 while upping the final resale value by $10,700, allowing for a recoup rate of 102 percent. A key takeaway is to avoid high-end finishes for this kind of renovation: using the most expensive tiles for the flooring or installing a luxury bathtub won’t recoup the same cost as mid-range finishes in the same room. Potential home buyers need to be able to understand the room’s value at a glance, and the average person doesn’t understand the true cost behind high-end finishes. Well executed mid-range finishes are enough to make the bathroom look nice without breaking the bank, allowing for maximum recoup at the time of resale.

Minor Kitchen Remodeling

Similar value to the bathroom remodeling comes from kitchen remodeling. The average cost on a minor kitchen remodel is $14,913 that boosts resale value by $14,691 for an average recoup of nearly 99 percent. This level of remodeling includes updates such as refacing cabinets and drawers, new sinks and fixtures, new appliances, laminate countertops, and updated floors. Make sure to follow current trends to see what home buyers are looking for, such as open concept kitchens that offer the illusion of more space at a reduced cost to the renovator. Once again, you want to avoid high-end finishes and high-end appliances unless the property is in a neighborhood that caters to a wealthy demographic. Not only does the average person not understand how costly elegant finishes are, but you could also price out potential buyers due to a higher listing price brought on from high-end finishes like granite countertops or elaborate cabinets. For appliances, aim for energy saving appliances. These mid-range appliances look nice and save the future homeowner some money in the long run, letting you add even more value to the final resale price.

Wooden Deck

Adding overall square footage to a home is always a surefire way to increase value, but home construction is a costly venture. Wooden decks are an excellent way to add square footage without straying into the cost and headaches of full home construction. The average cost to build a deck is $25 per square foot, but an entry level deck can cost as low as $15 per square foot. Deck sizes average between 300 and 400 square feet and typically cost between $5,000 and $10,000 with an average cost recoup of 75 percent. If you’re looking to maximize the visual appeal of the deck, put your money towards high-end deck railings for a cost effective way to add an element of luxury to the deck and entice home buyers to spend a little more at resale.

By comparison, there are plenty of renovations that do more harm than good- whether it’s a case of putting personal preferences ahead of logical decisions or not realizing the future costs of a renovation. Take swimming pools for example: you would think that every potential homeowner would love their own private swimming pool located in their backyard. This expensive renovation is not only a personal preference, but also a burden on the future homeowner due to the time and monetary cost that comes with pool upkeep- an average of $4,000 a year. Installing a swimming pool may sound like a major value add, but unless you know a buyer looking specifically for what you’re installing it could become a $20,000 mistake. In an upcoming blog we will be diving deeper into common low value renovations to avoid in your fix and flips, so stay tuned!

Asset Based Lending is happy to fund our borrowers’ successful projects and help them maximize their profit margins. We work with both new and experienced real estate investors and tailor our hard money fix and flip loans to match your specific project, offering you the most flexible loans at competitive rates. In addition to fix and flips, we also fund new construction and rental loans with the same level of flexibility and professionalism. Our team are experts in closing deals quickly and are always ready to discuss your project details. If you’re a real estate investor looking for reliable hard money loans, contact ABL to fund your next success.