Gearing up for your first rehab? Whether it’s a flip or BRRRR, I’ve got earth-shattering news for you that will change everything you thought you knew about value-adds in real estate: If you’re trying to build equity for leverage or to cash out and want to get the best bang for your buck, forget the roof, new furnace, kitchens, or bathrooms. You need to take it outside and spend some real money on landscaping.
But everyone knows kitchens and bathrooms are where the big money is made, right? Don’t get me wrong—you should update kitchens and bathrooms, but we are talking return on investment (ROI) here. Kitchens and bathrooms are high-expense, high-return areas. Landscaping is a low-expense, high-return prospect. You’ll get a better return on landscaping than you will any other rehab expense.
First Impressions Count
People ask all the time how much value-add there is for a new roof or HVAC system. Of course, the value of the house will increase if you go from a roof full of holes to a new roof, but that doesn’t really give you ROI. People expect a roof to function when they buy a home. They expect the furnace to work—that’s not a value-add proposition.
When you are rehabbing a property, the goal is to get a better return on your investment than the 1:1 you get from functional, nonaesthetic items.
I’ve flipped my fair share of houses, and I’ve helped investors sell their flips many times. It’s almost like an epidemic—they make the inside of the house beautiful and then say they have no money left over for landscaping. I’ll make suggestions; they’ll refuse.
The listing photos of the interior look amazing, and people roll up and get confused that this beautiful interior is connected to this terrible exterior with a lawn full of weeds and gravel. The truth is, if people are turned off by the front of the house but you’re still lucky enough to get an offer, you’ll likely be…