5 Ways To Take Your Deal From Good To GREAT
By JD Esajian on November 30, 2018
Try as you might, not every deal you are involved in will be a home run. For every ten transactions, only one may be a real knockout. The return on the majority of deals you get are based on what you do with them. The minor (or major) tweaks you make will determine demand, which ultimately dictates the bottom line. As a rehabber every property you get is a blank canvas in which you can do almost anything you want with. Sure, there are some limitations but for the most part you can change the property to your liking. With the right changes, and by implementing the right tips, you can turn an average deal into one that doubles, or even triples, your projections. Here are five things you can do to help turn an ok deal into a hit.
- Add bedroom. An extra bedroom alone can add thousands of dollars to your sales price. It is no secret that real estate is based largely on comparable sales. A three-bedroom home will almost always be compared to other three-bedroom properties in a given market. Regardless of the improvements and updates you make it will be tough to exceed the highest three-bedroom comp in the area. However, by finding a way to add a bedroom it allows you to use four-bedroom comparable sales. This opens the door for additional comps at much higher prices. Adding a bedroom often takes some creative thinking but may not be as difficult as you think. Start by looking to the attic and basement then see if there is anyway to add on to the property. This will take a little capital, but if done right the return almost always exceeds the expense. If you do nothing else but add a bedroom to your rehab you will see a sharp increase in your sales price.
- Deck/patio area. Buyer demands are often cyclical. In recent years there has been a shift in how, and where, homeowners like to host. In the past the living room was the main attraction of the house and where most people congregated. Today there is much more focus on the exterior. A second item that will add appeal, and value, is an updated deck and patio area. Most novice rehabbers are under the impression that buyers want as much yard space as possible. Sure, we would all like a bigger yard, but the goal is to have usable space that fits the market. A deck doesn’t have to take up the whole yard, even a modest deck fits the bill. The goal is to add a place where a buyer can put a grill, a few chairs and maybe even a small table. If the yard is on the small side, the deck can be small as well. If the yard is large, your deck can be a little bigger, but it doesn’t have to eat away all the yard space. A deck is one of the safest things you can do to generate revenue on any rehab.
- Entryway. First impressions make a big difference with potential buyers. Oftentimes, the first impression is the snapshot they have of the entryway of the home. You can do great work on the interior, but if the exterior and entryway of the home are ignored you will feel the impact. As you consider what upgrades and improvements to make it is important to consider the entryway. For starters, improving the front door is a must. This can mean swapping out an old door or if the door is relatively new, adding a fresh coat of paint. The front door is the centerpiece of the walkway. Next, you need to consider the entry path to the home. Without a dedicated path, buyers will sour on the property. Finally, look at the shutters, gutters and even the roof to make sure they updated and inviting. Something as seemingly minor as the shutters can influence appeal and make the entryway feel dated.
- Flooring. In addition to a desire for outside entertaining the biggest change in property demand is with flooring. Long gone are the days of thick carpeting throughout the house. A majority of buyers today want hardwood floors. Fortunately, there are more hardwood options today than ever before. There are a handful of products that can fit almost any style and budget ranging from high end to everyday affordable. If there is any carpeting in the property it is almost a no-brainer to rip it up and go with hardwood. Of course, there are some exceptions based on the market, but new hardwood flooring will change the entire interior for the better.
- Price right. When you have a rehab you are proud of the natural instinct is to price it on the high end of the market. As good as the result may be, you need to always consider your market. Pricing too high will instantly kill any momentum you have and leave you scrambling for buyers. On the flip side, if you price right, or even slightly below fair market value you may be able to create a bidding war. With multiple people wanting the property the value will rise and you will ultimately be left with a higher sales price. Instead of out-pricing the market always look at the comps and price accordingly.
Your ability to squeeze a few extra thousand dollars on a half dozen rehabs a year has a tremendous impact on your bottom line. Use these five tips to help turn an average deal into one that you are proud of.