Bathroom Renovation 1

Last year, I found the “Better Homes” TV show, which I want to share with y'all flippers. They tell you how to renovate home divisions on a budget. In this particular video, they teach how to renovate a bathroom, spending very little money. The result (see it by yourself) is nothing but great! I think that this is great advice for flippers that want to keep the budget low. Lets have a look at the key:

1) They didn't use more tiles, they simply painted those that were there! It cost them under $200 to paint them. White is always a great colour for everything (being the walls or the tiles), because it will never be trendy (which means that may lose popularity) at the same time it is always modern... and cheap! Not seldom you find yourself buying very expensive ink because the colour is too specific.

2) They got the furniture and accessories from a local market, for which they paid incredibly low prices. They needed some adjustment, whose time needs to be accounted for. You may or may not have the time to do it, but if you have it, its definitely worth it. Try to be supervised by someone with lots of experience, because if you're flipping a house, the last thing you want to do is the potential buyers to find it recycled instead of flipped.

3) The vanity and rest of the furniture/cabinets came out for less than $100. She painted the vanity with a nice black that goes magically with the rest of the bathroom.

A nice tip given: paint the walls with the same colour of the floor (or one of the colours that crop up if you have multiple colours). This technique, called Clay dust, ties the whole room together.

The whole project came up to less than 2k, which is unbelievable low for the transformation that took place. Keep in mind that 800$ were spent on the tub insert, which was very expensive.

(the prices are in Australian dollars).

Season 2 Episode 2

In this episode, Tarek and Christina bought a house on probably one of the best neighborhoods in the whole show. The flow of the house was awesome, but a lot of work was foreseen when Tarek and Christina inspected the house. Lots of wallpaper, old fashioned materials (including cork walls). They estimated the rehab to cost 80k and take 6 weeks. The problem is that they had all their money tied up in other flips, so they had to take out a hard money loan. The house was eventually bought for 625k, and the load cost them 200 dollars a day.

During the rehab, the contractors found mold in some divisions,which was caused by deterioration of the roof. The toxic removal cost about 15k and the roof cost another 10k, which altogether is really a lot of money. Keep in mind that there were million dollar houses in the neighborhood, so Tarek and Christina gave this a go because of the target selling price. At some point, they looked to 25k doors for the main door. Think about it, 25k for a door and 25k for a toxic removal and a new roof, thats enough for a condo in Europe!

They asked a local contractor for a custom kitchen which cost them another 15k. At this price point, buyers expected no less. They changed the stair rail and with their super expensive door, they made a petrifying entrance.

As the things were shaping up, they took a look at the pool, which was a mess with broken concrete. They arrived at a cheap solution (7k) to fix up the pool.

Comps ranged between 859k and 950k. They decided to list it at 949.9k. They eventually got an offer for 940k and if the deal goes through they stand to make a profit for a little over 80k.

Analysis:

I think that Tarek and Christina over did a few things. No question about toxic removals and fixing up roofs, thats were you should cut no corners and yeah, its kinda difficult to realize before you agree on buying the house. Putting that aside, I see major expenses which were not absolutely necessary and, in my view, they didn't contribute to getting more or higher offers. First off, I would not spend 15k on one single (even if it is the entrance) door. Think about it, the house is worth 940k. So, 15k is 1.6% of the house. If the house was worth 350k, which is way more in the range of prices Tarek and Christina sell houses for, we would be looking to a $5600 door. This is insane!

Now, we should keep in mind that they spent 25.6k in hard money loan fees. When taking this into account, a 15k door doesn't look that expensive, does it? But why to spend so much money on a door when you can do great things with the pool? And why should one door be worth as much as one kitchen?

As for the rest, I think that the custom kitchen was awesome and really adequate for the type of house they flipped. The cabinets with the crown looked awesome! The stair way was great, but I think they had too many vanities (at least 6?) and way too much granite. We've seen way better shower tiles / showers. At the end, great profit, but they could have gotten way more. I think that the key was the low purchase price point.

Season 2 Episode 1

In this episode, Tarek and Christina bought a house on a hill in LA county, biding at a foreclosure auction. The house has 1300 sq and the bid opened at 350k. Comps were about 550k and although no inspections were allowed, the deal sounded great. Their initial plan was to put 30k into the rehab and go up to 415k as max bid, on a 30 days flip. Although there were instantaneously outbid throughout, they eventually got it for 410k.

Online, the house was totally put together. However, most of the things (including the flooring!) inside were gone and the house was left gutted. Other than the foundation and the walls, nothing was left behind.

As they never bought a house in LA county before, they asked a flipper/real estate agent in the area for help. After being told that buyers in that area wanted a vibe that the house is unique, Tarek and Christina decided to change their normal flipping model, based on using modern and neutral, but not top quality, materials. In Orange county they had to go with something different – visiting a comp being sold for 725k – they have realized that materials like pergo (laminate) should not be used in this particular flip. In short, the conclusion was that they had to spend money in order to make money.

As usual, they started by opening some walls, which gave the house a nice – and modern – flow. As usually, flippers, keep this in mind! You should start your flip by looking into walls: which walls should go? You're not directly increasing the actual space of the house, but people inside will have the impression that the house has gotten way bigger!

Although Matt – the local flipper - told Tarek and Christina that buyers wanted real wood instead of pergo, they decided to go with high quality pergo as the real wood was too expensive. Keep in mind they needed between 700 and 800 sq of wood flooring. As for the rest, they went with really standard materials. I personally don't like flat cabinets for the kitchen, which they used in this flip. A few other things stood out in the breakdown of the budget. They spent 20k on landscaping – this was 67% of their initial budget. The sub-floor was not even in this house. They had to pay 2k to even it out. This is usually one of the things flippers forget to check (in this case they could not, as they weren't entitled to inspect the house). The final rehab was 123k, thus quadrupling the initial budget.

Comps ranged from 519k to 599k. Their break even was 560k, which was extremely high taking the comps into account. They took a risk and listed the house for 649.9k. They got multiple offers that drove the price up to 685k. This generated a huge profit of 117k.

Although this generated a huge profit, I think it could have been larger. They spent way too much money on specific things on this one, including overly expensive landscaping. As they turned out to have huge profits, they did wise investments. I will be curious to see what I would have done (and what profit I would have made) in this case. Congrats guys for the very successful flip!