My wife has a quote from Zig Ziglar written on the whiteboard next to our garage door. It says…
“You don’t have to be great to start, but you have to start to be great.”
She put it there for our daughters to see everyday as they walk out into the world. However, I also like reading the quote. It reminds me that we should all be trying something new, from time to time, and work hard to become great at it.
Last summer, Manny and I decided to tackle the biggest fix and flip project we’d ever done.
We purchased the property, located in central Phoenix, from a wholesaler. At just over 1,000 square feet with only two bedrooms and one bathroom, it had very little to offer today's homebuyer.
Here’s a walkthrough video Manny did at the property just before we bought it…
That was almost 15 months ago. I’m relieved to announce that the house is finished and we close the sale next week.
Here’s a before and after picture of the property…
3 Ways to Add Massive Value
This central Phoenix home sold in just one day for full asking price, and for $100,000 more than any other property in the subdivision. In order to accomplish this we had to create massive value in three important ways.
By converting the carport to a garage.
By adding a 3rd bedroom and 2nd bathroom.
By upgrading the major mechanical components of the home
Converting the Carport to a Garage
It’s Arizona, hotter than a snake’s butt in a wagon rut in the summer. No one wants to park their car outside. Homebuyer’s will pay a huge premium for a garage, especially in areas like central Phoenix that don’t have many houses with garages available to buy. We estimate the cost to convert the carport to a garage was approximately $8,000. It’s hard to know how much the house would have sold for without one, but it likely increased value by over $30,000. That’s an excellent return on investment.
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Adding a 3rd Bedroom and 2nd Bathroom
Regardless of location, selling a 2 bedroom, 1 bathroom home for top dollar isn’t easy. Even empty-nesters like to have at least three bedrooms and a guest bathroom. We added over 1,000 square feet of space and a full master suite, making the home more appealing to a wider variety of buyers. Fortunately, we had the extra land required to make the addition, and there were plenty of other investors in the area that made similar additions. This gave us some comfort knowing we could add on and get a decent return.
Upgrading Major Mechanical Components of the Home
By installing new windows, as well as new plumbing, HVAC and electrical components we basically guaranteed the homebuyer at least 15-20 years of maintenance free living. Not to mention, we also installed a new roof. These are all big ticket items that may prevent a retail homebuyer from writing an offer on your fix and flip. Whenever possible we try to replace those components that don’t have at least 5-7 years of useful life.
Remodel or Rebuild?
Yes, this was definitely more like a rebuild than a remodel. However, we’ve found that in most major cities like Phoenix the best margins to fix and flip are made with larger scale projects. We still do our share of rehabs here that don’t require any reconfiguration or square footage additions. The truth is we prefer those types of projects. But when we take on a larger project like this we always look for ways to add massive value, because that usually equals massive profit.
Be sure to check my next post, 2 Reasons You Shouldn't Do ANY Work at Your Fix and Flip Project, for an update on our central Phoenix project.