This is a common question I hear from my buyers all the time. Most importantly, let's make sure your Flip does not become a Flop!
"Where will we ultimately get the greatest value?"
This question really depends on a few things. Of course, to start it all depends on what you are able to get the home for in terms of price. Whether it is the Fixer Upper (FU), or the home that is completely Move in Ready (MIR). Let's say all things equal, and this is no longer a relevant topic for discussion.
Here's the example I'm going to work with:
2 Homes, side by side in Sunshine Gardens in downtown Fredericton. Both are bungalows, same amount of bedrooms, bathrooms, lot size, garage... you get the idea. Both as 'identical' as possible. The main difference. One was recently renovated in 2015, the other hasn't been touched for 25 years.
To get a true idea of the comparison from one to the other, you would need to study both subject properties in depth to be sure of the quality of finish work and fixtures. Once you have a pretty good handle on that, it would be time to start pricing out your materials and also get a few quotes for the work.
If you're looking at a complete overhaul, there are a few ways you can get this quoted/contracted. You can go through a general contractor and get a blanket quote over all of the work that needs to be done. This would/should include all sub-contractors like your electrical, plumbing, etc.. and leave you not be worried about time lines or scheduling different trades. Usually the price on this type of quote will be higher, however your headache and stress level should stay relatively low.
Secondly, you could price out each separate job and contract each piece (bathroom, kitchen, flooring, tile, etc. etc. etc. ) to each trades person.
- Usually less money to do it this way.
- You really need to be hands on and schedule accordingly. If you are on a tight time line to completion, this might not be for you. Alternatively if you have the time to get your renovations finished, this is usually ideal.
- Not as much accountability. Think about this situation. You have had your entire basement finished and just paid a company to drywall and crackfill. The crackfillers went through and did their 3 coats and sanding, you checked over their work and paid. Then you start to paint. While painting you notice there are a TON of low spots. Good luck getting that contractor back to correct his mistake.
Let's pretend you opted for a General Contractor. After their quote for labour and materials, your renovation budget is $50,000. The home is currently listed for $200k, bringing your total investment in on this property to $250,000. If the home that was recently renovated next door sold last year for $235,000 - then there's your red flag. That's a $15k difference.
You either need to get this home at a the very least at a purchase price of $185,000 just to break even ($200k-$15k = $185k) or you need to adjust how you do your renovations. Maybe you would need to opt for the second option or pick away at some things yourself (i.e.: painting) to save a few bucks to keep you in line with the competing property. Lastly, if these aren't possible and a return is all you are looking for, you just might have to walk away and try another.
Currently in Fredericton, there are well over 2000 listings on the MLS. There are certainly some homes out there that can be turned over for a nice little payday, but you do need to have a Realtor that can search them out and bring them to you the moment they arrive on the system. Does your current Realtor do that? If you ever thought about going this route and wanted to discuss more, be sure to let me know!
Lastly, it's always important to TRUST the people you work with and also trust their competencies. Whether it is the contractor who's giving you the quote for reno's, the Realtor who is presenting you with the opportunity. Be sure to have a solid foundation and team that can make this happen!
If you liked this article, please do me a tremendous favour and SHARE it to your Twitter/Facebook or G+ account! The social media buttons below will do it with 1-click!