Ok, we have been alluding to this for a few weeks, but here it is. The first installment of everything you need to know about making money flipping properties and we are starting with the second most important subject that will quickly become the most important subject AFTER you get the potential buyer to enter the property, and that of course is “Kitchens and Baths”.
We will cover “street view” in our second installment, because that is the most important factor, if your property looks like it has a bad hangover from the street, not a single person will see your new solid oak kitchen or your gold plated faucets. If you can get the neighbors, the “lookie loo’s”, and the real buyers to spend a few minutes inside at your first open house, you may not need to have a second. This is not advice from some late night make a million dollars a month in real estate infomercial, this is tried and true tested advice that has proven itself in good times and bad.
I need to take a minute to put out a word of warning and this is not a word of warning to be taken lightly. I personally feel that flipping properties is a public service. You acquire a property that is in terrible condition, you repair it and everyone is happy, you make money, the buyer is ecstatic at the good deal they got and everyone in the neighborhood is thrilled that the eyesore down the street was converted from a crack house to the most expensive sale in the last 180 days.
Here is the warning! The people that make the most profit when flipping a property are the “do it yourself types”, “handymen” (women) or the “Jack of all trades”. No matter how skilled you are, eventually you will need to hire a contractor for a job you cannot do or are not willing to do yourself, but if you need to hire a crew at between $15 and $50 per hour per person to cut your lawn or strip the old shingles off the roof, your profit potential will evaporate at a rate of up to $1,000 per day. Flipping properties is primarily a job and even if you hire contractors, it will require as much of your attention as a toddler.
Our example property will be a typical middle class 3 bed 2 bath home with a 2 car garage. Actual purchase price and eventual valuation are irrelevant, because there is a huge price difference from market to market, so wee will work on percentages.
You acquire the property at about 50% of its value if it was reconditioned to new quality. It will cost about 25% of that final valuation to bring the property to the condition to demand that valuation. Simple math; you pay $50k to acquire and then put in $25k so that you can sell for $100k.
Kitchens and Baths sound like two separate functions, but they are not. They are twin brothers from different mothers and this is why. Normally you will “gut” both the kitchen and the bathrooms at one time in one step.
TIP: save your materials and I mean everything, including the old toilets, sinks, vanities, mirrors, hinges and knobs. These have a real value, and the top of a toilet tank alone could be worth 4 times the price of replacing a toilet to the right person.
With the exception of the bathtubs, your kitchen and bathrooms should be stripped down to nothing (including any tile around the tub and the flooring if outdated and all switches and outlets). Three open rooms that are ready to be painted without any obstructions or need for masking. Get in there and paint the heck out of them and don’t be shy (off-whites are the best colors because most people will not abject to the color, if you go with a strange color the buyer may ask for a repaint).
Now that you have fresh paint on everything, including drops and glops on the floor it is time for cabinets. Go to the local home center and consult with the person that is in charge of kitchens. They will have a computer and all you need to do is give them the physical dimensions of your kitchen (don’t worry about the baths yet). Within about 1 minute they will show you many layouts for cabinets, sink, frig and dishwasher locations.
Pick a layout that closely matches the original sink, oven and frig locations so that you do not need to do major changes to plumbing or power. Then purchase the cabinets from “Stock” or standard production. The quality is up to you based on the market and your budget, you can go for a laminate or solid oak doors, but do not buy anything custom. At the very end of your consultation with the kitchen person, tell them you also need two vanities of a certain length for the bathrooms that match the kitchen. You will walk out of the home center that day with everything you need to get cabinets in your kitchen and vanities in your baths. They will be unassembled and very heavy for their size, but all you need to do is take them to your property and follow the instructions.
After you place your cabinets and vanities your next step is countertops and lighting. The countertops will take at least a day to be produced, but expect up to 3 days. You CAN NOT order the countertops until AFTER you set the kitchen cabinets in place. You go to the countertop manufacturer with dimensions; they do not come to you. The measurements and angles you supply are the numbers they work from. Do not try to save time by working from the plans printed out at the home center because your finished product will not be the same and that is a guarantee. Place your cabinets, take the measurements, then order your countertop.
I do not want to sound bland, but there is a color that most successful flippers adhere to unless they are doing a property for a specific client, and that color is FHA brown. It is a “touch” darker than a tan or bone color, but it is not a real brown. The reason is, it appeals to most buyers. This is the normal color they use for walls, appliances and flooring; all neutral and non offensive or shocking.
You can purchase your appliances, toilets and sinks during this time because on the subject of kitchens and baths you are at a stand still until the countertops are complete. We are only covering kitchens and baths here, but you will be working on the rest of the interior and exterior at the same time. Two things that need to be considered at this time depending on the property is piping a ¼ inch water line to where the frig will be positioned (ice maker) and installing a GFCI switch for the disposal if the home is not already equipped.
Another note: When talking about kitchen appliances, we are not talking about a refrigerator. Do not install a frig, it in not a fixture. Sinks, dishwasher, disposal is as far as you go.
Install your kitchen and bath lighting, countertops, sinks (kitchen and baths), but NOT the toilets. Get both the kitchen and baths to the stage of completion where a folding step ladder will never enter the room while you own the property.
Another tip: Save a few of the heavy duty cardboard boxes the kitchen cabinets were packed in. You may need to use them to protect the floor if you need to change a bulb.
Also, depending on the color and condition of the bathtubs this is the time to bring in a specialist to recolor or recondition them to a color that is complimentary to the final product.
Now it is time to put down the flooring. This is something I personally hire out, but if you have the skill, time and desire this is expensive. Not so much in material, mostly in labor. I can buy a few yards of at less than $20 per yard, but it costs me $200 per yard to be installed (carpet is about the same).
At this point there is only one thing left to do to complete your kitchen and bath makeover, and that is to install the toilets. This is just a tip I learned over the years, but if the flooring is installed before the toilet (tile or linoleum) they will take it to the drain pipe stand, they do not need to make a cut to drop linoleum around the base or miter tile to fit, and when you set the toilet it is much easier to stabilize it and then seal it with caulking.
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