Once you’ve discovered your diamond in the rough and are ready to turn it into a real head-turner, it can be hard to figure out exactly what renovations to focus on. Inexperienced flippers in particular may think about turning your new fix and flip investment into the house you’ve always wanted.
If you’ve always dreamed of a master bedroom balcony, it may seem like a good idea to build a mammoth balcony with space for a coffee machine, full table with chairs for the family, and even a treadmill for early-morning runs. Or maybe you always wanted a fully furnished basement with a bar and space for a massive flatscreen to watch the big game. The thing is, your idea of the perfect home is rarely the same as your future buyer’s.
Remember: although the house is yours, it is not for you. A lot of the expensive renovations that you would do to your own home may not be worth the return on investment. It is impossible to predict exactly what buyers want, but it is possible to make an educated guess.
So when you are applying for your hard money loan, how do you determine which areas of home improvement to focus on and which investments are most likely to appeal to buyers?

Do your research.

The first thing you should do with any home is research the locale. This should be done before you even purchase the home because it is a key factor in figuring out if the purchase price is reasonable, how much renovations will cost, and how large of a profit you can turn on the fix and flip. A convenient resource for estimating home values is Homes.com: you can plug in the property’s address and see the values of nearby homes, or search for a region and look at demographic, employment, and lifestyle data for the area.
Once you have the property, go even more in depth: investigate the surrounding houses and see what features sell well. Odds are, your buyers are going to want to keep up with the Joneses. Do all of the nearby properties have the latest energy-saving technologies? Is every driveway made with pavers? If all of the neighbors have an outdoor patio with space for a grill and beautiful landscaping for barbeques, those options are a good bet. You want your potential buyers to see themselves hosting neighborhood gatherings and spending evenings flipping burgers while the kids play tag in the yard. One way to do this is by going door to door and asking people questions about themselves and their homes. In the worst case scenario, the neighbors will refuse to talk to you. In the best case scenario, you could learn a lot of valuable information about their lifestyle that you just can’t get from public data.
Another important aspect to look into is what’s nearby. Is there a school down the road? If so, there’s a good chance your buyers will either have a family or plan to start one. Make sure there are enough bedrooms and bathrooms to prevent screaming morning fights among kids. Parents may look for space for playrooms and a tile-floored laundry room for muddy soccer sneakers.
Are there lots of businesses? In that case, think about sleek and modern facilities, open spaces with lots of light to get away from the hustle and bustle of daily life, and easy-to-maintain features for potential buyers who don’t have time to worry about easily stained counters and tubs. For buyers who are constantly on the go, they want a home that will be an oasis rather than a headache.
With whatever data and information you can find, do your best to find out what kind of people tend to settle down in the area. Once you know who the future homeowners will probably be, you can focus your remodel on meeting their particular needs and wants.

Keep it neutral.

Although it is important for your house to stand out and have personality to “wow” potential buyers, you don’t want to do it by painting the entire interior crimson. Keep the paint colors neutral and add appliances and fixtures that are simple and classic. House shoppers already have lives with their own habits and tastes, and you don’t want the style of your remodel to turn them away. Your goal is to design a house that a wide variety of people could imagine building a life in. The more in demand your property is, the more it will sell for.
Don’t overspend on details. No matter how much research you do, you will never be able to anticipate all the tastes and desires of the future homeowners. Odds are, they’ll want to tweak certain aspects of the house to make it their own. While everything should appear clean and fresh, you don’t need to bother with a custom-designed crown molding. Being too particular about the little things can end up as a significant extra expense, but your buyers probably won’t care enough to pay significantly more.
One way to add personality without breaking the bank is to visit antique stores and look for simple, appealing pieces that have a vintage look but will work with almost any decor or taste.

Make sure everything is up to date.

Even if you find a traditional one-setting washing machine and dryer nostalgic and charming, odds are your buyers won’t. Once again, consider the area and the type of people who will be buying your house when deciding which appliances are appropriate. Go back to your research. If you need more information, consider contacting real estate agents in the area and talking to them about what features sell well and about what buyers are looking for. If you type in the zip code on Realtor.com, you can get a list of real estate agents that serve the area to get in touch with.
Most of the time, you don’t need to purchase the latest technologies when installing new dishwashers or refrigerators, but you should make sure your appliances can do everything your buyers may have become accustomed too. In addition, it’s often not worth it to bother installing niche appliances like an electric towel warmer. If a buyer wouldn’t miss it, they’re not going to pay extra for it.

Give them breathing room.

Buyers typically aren’t just looking for a house when they are house-hunting. They’re looking for a lifestyle, and they want the freedom to turn your house into theirs. Make sure that your renovations don’t restrict the buyers’ from having some design freedom of their own.
Once again, the house is not for you: just because you like your living room or kitchen set up a certain way doesn’t mean buyers do. While remodeling, this means making sure that your alterations are not restrictive. Ensure that the outlet placements and architecture allow for customization.
This also applies to your presentation and furnishing of the house at the end of the road. When you stage the home, you want to inspire people to picture themselves living there, not make them feel trapped. If you’re afraid that you don’t have the necessary interior design skills to achieve this, look for a staging company in your area. They’ll talk you through their ideas and implement a furnishing plan that potential buyers will love.

Expensive upgrades that just aren’t worth it.

Now that you know the general principles that should guide the design of your remodel, you should know that there are some upgrades that may seem like a great idea but rarely ever pay off.
First, pools. Pools are very expensive to install and maintain, which means a whole lot of expenses for you and a whole lot of expenses for the future homeowners. It is possible that a pool would bring up serious safety and cost concerns in potential buyers and unlikely that you will gain a proportional profit from them. Remember: people who want a pool may buy a house without one and install it themselves, but people who don’t want a pool will never buy a house with one.
Another common but unrewarding renovation is the basement. Sure, you want the basement to be clean and safe, but you don’t need to add in any fancy touches. Many people have no interest in a multipurpose basement and those who do want a high-functioning basement often have a very particular idea of what it should be. Having a top of the line basement won’t hurt your house, but it is unlikely that it will add any real significance to your After Repair Value.
Finally, avoid overzealous landscaping. While you want the property to be attractive and presentable to make a great first impression, investing a huge chunk of your time and energy (and money!)  just won’t pay off. Most buyers don’t base the worth of the house on the flowers in the backyard.

From the moment you put together your scope of work and hard money loan application, to the final touches on your fixed up house – renovate for your buyer, not for yourself. If you get carried away, you could end up overspending and eating away at potential profit. Be practical, do your research, and make smart decisions.