Our Hardcore Flipping: Building an Addition event this Saturday was a huge hit!
We had over a dozen attendees spend two hours of their Saturday morning beating the heat to learn how adding an addition to a flip can lead to bigger profits…
Looking at a home to flip using its existing footprint can significantly reduce the number of deals you find and future potential profit of those that you do buy.
The home we previewed was 832 square feet with 2 bedrooms and 1 bathroom on a large 9,000 square foot lot. Further, the kitchen area was separated from the living room and the attached garage was not accessible from the main residence. The infrastructure of the home was solid, but the After Repair Value as a 2 / 1 didn’t pencil.
With some imagination, the investor on the project designed a 450 square foot addition which included a new master bedroom / bathroom and direct access to the garage. Additionally, the proposed renovations opened the kitchen area to the living room giving the appearance of more space.
The result of the addition and modified floor plan should result in a $75,000 to $80,000 increase in the sales price. It also made the property more marketable because it now could target a larger pool of buyers looking for a 3 / 2 configuration.
Adding an addition to a flip can be very profitable, but add substantial risk. Some of the biggest hurdles for novice investors considering an addition is to formulate an accurate budget and project timeline.
In most areas, building an addition will require building plan approval from a local building/planning department. Before purchasing a property with an addition in mind, visit the local building/planning department to verify that your property would allow for an addition. Further, based upon new regulations, the existing structure may need to be updated to new building codes which could make the project costs unreasonable.
Creating your project budget takes careful preparation. If you are not a contractor, be sure to work with a licensed contractor that specializes in building residential additions and has worked with the specific building / planning department that would handle the approvals on your project. Review the budget carefully with the contractor and ask where potential cost overruns could occur. Be sure to add a contingency to the budget in case unexpected repairs are required.
Our Hardcore Flipping: Building an Addition event this Saturday offered our attendees a in depth clinic on successfully building an addition to a flip. We covered topics such as how the investor designed the new configuration for the project, the hurdles he faced though its construction, and the expected sale proceeds he should receive from the additional square feet.
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