High-ROI, Value-Add Renovations for Any Investor (and How Much They'll Cost)

Henry (0:00)

Spend $20,000 on a kitchen, and your house is worth $50,000 more. This is the whole game of real estate investing, and I've done it more than 100 times. You buy an undervalued house, you renovate the right things, and the value goes up far more than you spent. The hard part is knowing which fixes actually matter to home appraisers, home buyers, and home renters. So today, I'm going to show you which renovations pay you back the most and how to estimate the cost of each one before you buy the house. We'll cover kitchens, bathrooms, and even a few of my favorite hacks that really boost your value for a lot cheaper than you think. I'm trying to make you tens of thousands of dollars in this episode, and all you need to do is watch.

Welcome, everybody. This is part two of our series on how to estimate rehab costs. Check out part one if you missed it. That's where we covered the very important big five plumbing, electrical, HVAC foundation and roof. Those are your big ticket items. We want to make sure that you are accounting for those prior to buying the home so that you can get the home at the right price. But today, we're covering the things that you can actually do that put the dollars in your pocket. We are talking value-add investing. This is my bread and butter. This is what I love to do. And this applies to flipping, but it also applies to rental properties. You can add value pretty easily in single-family and small-multi-family homes if you know what to look for, what it's going to cost, and you know that it's actually going to give you a return. Because there is a lot of renovations in value-add that you can do that don't really add a lot of value. It may look pretty, but it won't always put money in your pocket. So today, I'm going to cover where in the home you should focus on adding value, how much it's going to cost you to add said value, and whether it's going to be worth it or not for you to even take on the risk of doing it based on the returns that you could get. All right, since everybody knows that kitchens and bathrooms sell home, let's start with the kitchen. When I am looking at adding value to a kitchen, first and foremost, I am looking to see, is the layout of the kitchen as it sits desirable? Remember, just updating that kitchen is going to add value. But if it's got a decent enough layout, spending the money to rearrange the kitchen completely is not going to bring you much more value than you just renovating in place. So I would not recommend completely changing the layout of a kitchen unless the current layout is very undesirable for the house that you have. So let's go through each one of these individual factors of a kitchen and talk about what it might cost.

Starting with the flooring, I typically don't budget flooring in a kitchen separately than flooring for the whole house. When I'm planning a renovation, the flooring that goes in the kitchen gets bundled in to my flooring costs for the entire house. But on average, I'm going to put tile in wet spaces.

And in kitchens, I'm typically trying to use larger tiles to save money. So think the 12 by 24 inch brick style tiles, or I'll do a 12 by 12 inch square tile, and I'll mix up the colors to make it a little more modern.

But think of a tile floor, probably going to spend anywhere from $1.50 to $3 per square foot for tile. So if you want to understand how much it's going to cost you to put flooring in your kitchen, you just need to measure the square footage of the floor, and then multiply that by the cost of your tile and then the cost of the labor. Labor is going to cost anywhere in my neck of the woods between $1.50 and $2.50 per square foot. So if I'm paying $2.50 for tile, and I'm paying somebody $2.50 for labor, that's $5 a square foot. If I have a 250 square foot kitchen, 250 times 5 is about $1,250 for flooring. Next, let's talk about countertops. I am typically only renovating a single-family three bed, two bath, maybe smaller, maybe a little bigger home. And on average, in that size home, the average square footage of kitchen countertop space is usually anywhere between 35 to 40 square feet, all the way up to about 70 square feet. If you are renovating massive homes, you are going to need to be on the higher side, square footed side. If you are renovating smaller homes, you might have a galley kitchen that's a little smaller. Maybe you are at 25 to 35 square feet. A typical price point for countertops, depending on what you get, maybe solid surface, maybe granite, maybe quartz, you can expect to spend anywhere between $25 a square foot, all the way up to $40 a square foot. So if you are pricing this, call a countertop company and ask them, what do they charge per square foot for an average quartz? Or what do they charge per square foot for an average granite? If they are charging $30 a square foot, and you are installing about 40 square foot of countertop space, well, that's just a quick math problem of 30 times 40