Last month we talked about the BRRR method for creating real estate wealth. Buy, Renovate, Rent, Refinance, Repeat is a way to stack investment properties by building value in one to create funding for another. But for newbies, it’s often that critical second step–renovation–that becomes the biggest obstacle to making money. Check out these tips to avoid cost overruns and max out your profit.
Don’t blow out the budget
When renovating a home, you can’t do it all. (And if you don’t plan to live there yourself, why would you want to?) So start with a list and stick to it. Come up with a budget that includes up to a 20% cushion for unexpected costs that crop up.
Remember the biggest return on investment comes from roof repairs, landscaping, bedroom additions, and kitchen and bathroom upgrades. But if you aren’t flipping the home, rental value can be a lot more about the way the home looks.
We aren’t suggesting you watch an internet video and then lay new tile on your kitchen floor, but think about how much you can save doing the basic work yourself. Remove cabinets, tear down a fence, pull up old carpet, and probably easiest and most cost-saving of all, plan to do all the paintwork.
Unless you’re super handy (and frankly, somewhat skilled), you’ll want to hire a contractor for some of the technical work. Ask what’s included in the contractor’s fees and get a good estimate for total costs. If the price is prohibitive, act as your own contractor and start getting good recommendations for hired labor. And then get on the phone. You’ll be there awhile… but you’ll save money, too!
Skimp on supplies
This area, especially with supply low in this current market, is likely to be the most challenging to keep within the budget. You’ll find decent savings with used fixtures, recycled (or rescued) items, and building supplies from the Habitat Humanity Re-Store. Or try one of several building wholesalers or bargain stores with partial pallets available for purchase.
And ask your contractor. He may have items left from another remodel. He might even be willing to discount your total costs when you let him know there could be other home renovations in your future.
Take a shortcut
Ask yourself what work is critical to rehab and what could be touched up for the maximum benefit. Maybe the kitchen cabinets are quality wood but just need a fresh color to brighten the space? (New knobs are a nice touch, too!) A contemporary light fixture in a wide-open space can really make it shine. Don’t count out peel-and-stick flooring, especially in low-traffic areas like the laundry room.
Don’t forget that anything you remove can potentially be donated (see Habitat for Humanity Re-Store above). Donations mean a tax write-off, something you should covet as you Buy, Renovate, Rent, Refinance and Repeat!
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Check out our home buyers’ Clean Title FAQs and reach out at 985-277-5095 anytime with questions!
Disclaimer: This blog is not intended to give legal advice. Keep in mind that each state has different real estate laws and that throughout Louisiana, rules, and customs can vary among parishes and regions. If you’re buying or selling a home, please check with your local Real Estate professional or Real Estate Attorney on the specifics of all Real Estate matters.