Which room would you think has the potential to generate the best ROI in a house flip? The master bedroom? The kitchen?
The answer is actually the bathroom. A mid-range bathroom remodel during house flipping has the great potential return on investment. If you put $3,000 into a bathroom, the expected return is $1.71 for every dollar spent.
If you think about it, it makes a lot of sense. Fixing up a bathroom doesn’t take all that much work if you know what you’re doing, but it’s an intimidating enough project that, if left undone, potential homebuyers won’t want to handle it themselves. Plus, tastes are usually pretty generic when it comes to bathrooms. A nice neutral tile, a pale color on the walls, and a nice big shower head will please just about anyone who walks in.
Compare that to a kitchen. Doing a full remodel on a kitchen during your fix and flip can cost anywhere from $10,000 to $30,000. For that huge investment, you might end up creating a kitchen that doesn’t suit the tastes of half your potential buyers. Perhaps you went too modern or too dark with the cabinetry or too small with the storage space. People have very particular tastes when it comes to kitchens, and the value added to the home simply isn’t enough to make a huge kitchen re-do worthwhile.
Instead, if the existing kitchen is in reasonable shape, you can add a fair amount of ROI by simply painting the cabinets and replacing the hardware. Upgrading the appliances might be worth your while, but that’s a judgement call.
Another room to avoid is the unfinished basement. Unfinished basements are right up there with kitchens as the worst return on your investment.
What should you do if your flip has an unfinished basement? Don’t touch it. Leave it unfinished, and potential buyers will love it. They’ll walk in and see endless opportunity. Maybe this buyer would make it a man-cave and that buyer would make it a giant playroom for their kids. If you leave it alone, they can do whatever they want with it. The same principle applies to backyards.
Whatever your rehab plans, ZINC Financial can help you achieve them with competitive rehab loans funded quickly and reliably. Give us a call at 559.326.2509 to learn about our current loan terms.