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Low Value Renovations To Avoid In Your Next Fix And Flip

by | Dec 1, 2020 | 0 comments

Not all renovations are created equal- putting more money into a rehab doesn’t always mean you’ll see a comparable increase in the property’s resale value. In fact, some renovations barely impact the resale value compared to how much they cost and could even deter potential buyers from considering your property from the start. Successful fix and flips rely on reducing costs and maximizing value whenever possible, so it’s important to understand which renovations make the most sense for your project.

Since we already looked at some of the best value renovations for their cost, we wanted to share some home renovations that aren’t so great for return on investment so you can avoid costly mistakes in the future.

Each property and neighborhood requires a different approach to renovations but based on national data we believe the following renovations aren’t worth the time or money for a typical fix and flip.

1. Swimming Pool

The idea of swimming outside in your own private pool with your friends and family is great- but that dream never includes the initial costs, maintenance costs, or danger risks associated with owning the pool. According to HomeAdvisor, construction materials and installation of an inground pool starts at $25,000 minimum and only gets more expensive with increased size and choice of lining material. That price point doesn’t include the excavation costs, which goes up to $4,000 on average, or the minimum $2,000 that goes into the heating and filtration system required. For a very low-end estimate you’ll be spending over $30,000 on an inground pool and likely recoup less than half of that cost in the final home sale, as pools tend to only raise the home’s value by 7% in best case scenarios.

You could put much less cash towards much more cost-effective renovations to maximize your ROI. Based on the 2018 Cost vs. Value report, which uses national averages, you could do an entire midrange kitchen remodel for around $21,000 and recoup 81% of the cost at resale, or for roughly $19,000 you could do a midrange bathroom renovation for an average 70% cost recoup.

The future owner of the property will also be acquiring the annual maintenance and repair costs that come with owning a pool, which amounts to a few thousand dollars a year for inground and still more than one thousand for above ground. Plus, families with small children or pets may not want to inherit the potential risks that come with having a backyard pool, which could deter them from buying your property and potentially decrease your chances of selling!

With more people working from home in 2020 and generally spending more time at their primary residence, pool construction is up from previous years, but its better to let the home owner determine if they want to incur the long-term costs and risks of pool ownership.

2. High-End Finishes & Appliances

Everyone likes nice things- granite countertops and marble floors look amazing; the same way large whirlpool bathtubs and top-of-the-line kitchen appliances make a home feel luxurious. However, these types of finishes and installations could end up pricing your property out of the neighborhood as well as go underappreciated from potential home buyers. One of the biggest issues is the fact that the average person doesn’t understand the true cost behind such high-end finishes and details. Unless they’ve looked up the prices themselves for such high-quality material and installation, they may not look at a gorgeous kitchen and see the tens of thousands of dollars put into the room. For example, a lavish kitchen remodeling can cost upwards of $50,000 on average, which includes top level light fixtures, appliances, luxury countertops, custom cabinets, etc. as well as roughly 20% of the price going towards unexpected costs and issues during renovations. At that price point, the national average ROI indicates that you would be lucky to receive 54% of the value back in the final sale price.

Meanwhile, a minor kitchen remodel that focuses on more modest upgrades like new (but not custom) cabinets, mid-range countertops, new appliances, etc. costs far less than half of the extravagant renovations and comes with an average 81% cost recoup after the property is sold!

If you want to make easy upgrades that can be appreciated and don’t break the bank, aim for stainless steel energy-efficient appliances. They are aesthetically pleasing and the energy saving feature brings an added value to the potential home buyer since it will lessen their costs of homeownership over time. It’s also important to keep detail consistency throughout the house: having high-end finishes and appliances in one room but outdated looks in another will do less to increase the home value.

Unless you’re trying to make the whole house a luxury house with high-end details throughout, stick to the highest quality mid-range renovations possible to maximize your ROI while still increasing the property’s final value. Plus, you want to make sure your home matches the neighborhood its in as far as consistency of its quality and value. Turning a home in a mid-priced neighborhood into a luxury McMansion is a costly way to price yourself out of the area and make it harder for you to secure a buyer for that location.

3. Extensive Landscaping

Upgrading the curb appeal of a property is always a smart move as it’s the very first thing potential home buyers will be seeing and evaluating. However, an upgrade such as extensive landscaping typically won’t raise the property’s resale value for the amount of money it costs. The price will depend on the size of the yard and greenery chosen, but according to HomeAdvisor the average modest lawn renovation costs around $5,000 which includes new sod, bushes, and plants. If you’re looking to spend a low amount of money for an instant increase to curb appeal, take the landscaping money and put it towards a new entry way door. The Cost vs. Value 2018 Report claims that the average installation of a new steel entry way door costs $1,471 and typically comes with a recoup cost of over 91% in the final resale value, making it a much better option than landscaping for adding value for the money spent.

Plus, homeowners enjoy expressing themselves with their own decorations and landscaping falls into that category. People take pride in maintaining their lawns and designing their yards how they see fit, so spending money on extravagant landscaping could be a costly way to turn away potential buyers. Similar to swimming pools, the property owner will also be inheriting the maintenance costs and effort that goes into the lawn, so the more extensive the work the less likely a homeowner may want to get involved in the property. When it comes to landscaping, you should leave the decision and costs to the eventual homeowner rather than spending the money to add value that could potentially fall flat. Making sure the existing landscaping looks trim and clean when showing the house to potential buyers is enough to increase the curb appeal and help make the right first impression on the future homeowner.

ABL Helps Fund Renovations For Fix And Flips

As always, doing research on your property’s neighborhood, understanding your property’s best qualities, and being honest with your budget is the best way to understand which renovations to pursue for your fix and flip, or even when improving rental properties. With how competitive the current real estate market is, strategizing and making every dollar work to its maximum during renovations is the best way to see success with your fix and flip. Here at Asset Based Lending, we’re happy to help fund fix and flip loans for both new and experienced real estate investors. Our team provides borrowers with the most reliable hard money loans and highest quality service in the industry. We offer closings in as fast as 2 days with flexible loans that are tailored to your specific project, whether its fix and flips or new construction.


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