Designing a Flip Property
How is designing an investment different from designing project for clients? I get this question a lot and the process looks VERY different. Investing in Real Estate is very subjective and not everyone’s process is the same and I’m here to share my perspective and process. One of my top motivations for flipping houses besides the generational wealth I’m building for my family, is the legacy I leave behind for the buyer’s of my homes. I want the experience to be that same “giddy” excited feeling they experience when they first walk through the door to when they’re 6 months in and they admire the craftsmanship of construction.
The biggest difference I experience when designing for a flip is budget. When flipping, I work backwards from the ARV (after renovated value) of the home and what the property’s current needs are. The biggest questions I ask is… What will give me my best ROI (return on investment)? Those are usually as follows: new roof, new HVAC, updated kitchen, updated bathrooms, new floors, and exterior curb appeal. Windows are another big ticket item in Florida, but the numbers have to make sense for them to be update because Impact windows + doors are $$$$. This is only a framework for me, sometimes a property needs something larger like converting a Florida room into heated square footage, which can be a huge ROI!
The number one factor in designing a flip are comps. Comps=comparative properties that other agents and the appraiser will use to determine the value of the home (this is how I get ARV). A perfect example is this home we are currently renovating in Florida. This home has gorgeous Terrazzo floors and from a design perspective (and budget) I would love to refinish them and make the home feel super mid century modern. However, I have 2 comparable properties that are at the price/sq ft that I am aiming to list at and they both have vinyl wood plank flooring. In fact, none of the comps have Terrazzo floors. With our profit margin being super tight on this house, I can’t justify taking the risk when I know I could safely make the money. I know I just made a lot of you upset and I’m sorry!
How do you budget for a renovation?
This is another question I get often, and when I put it in my instastory poll 99% of you wanted to know more about the budget. Well lucky for you, I’ve linked everything in the photo at the bottom of the page so you can shop all of the finishes that I chose. Prices will vary by location and contacts. I can’t give you all the answers, as an investor, sometimes you have to learn lessons the hard way. We had to learn some hard lessons when flipping and one of those came from our estimate rehab cost vs. actual renovation cost.
A good rule of thumb is to get up to 3 quotes per project and ask a lot of questions. Make sure you + your contractor are VERY clear about the scope of work and how involved you will be in the process. Speaking from experience, finding good contacts will make or break your business.
Budgeting for finishes is dependent upon the ARV of the property. It’s common sense that the higher the ARV, the price of materials should go up. I wouldn’t put the same tile and finishes in a $200,000 house that I would in a $800,000. The flip we are currently renovated will be listed for less than $200,000 so you can see that the materials we are using are on the lower end of the price point. By no means does that mean that they have to be “builder grade,” it means you have to spend a little extra time to find the best product for the best price.
For tile, in a flip that is less than $200,000 ARV I like to stay well under $3/sq ft for bathrooms, kitchen backsplash, etc. I like to keep light fixtures/fans between $75-$120/fixture. I pride myself in spending a lot of time and thought in creating a cohesive design plan and fixture sourcing so that I am always creating the “wow factor” for buyer’s when they walk in.
What’s the Bottom Line?
Designing for a flip is less glamorous than people think. It takes a strategy, a creative mind, and experience. I personally love designing flips because I love a bargain. From a young age, I remember going to Good Will with my mom and sifting through the hundreds of clothes to find the “diamond in the rough” and that’s what designing a flip is for me. It’s about having a vision and letting the house and comps dictate the vibe then doing everything I can to create a Pinterest-worthy home. The downside is I feel my actual style and design capability is not translated. Because the comps and house dictate the big factors of the renovation, I do feel that my personal style is lost and that’s what inspired me to create SALT Custom Home Design. I hope you walked away with value from this post and if you’re looking to flip your first house, reach out to me, I’d love to help!