My husband and I took on the task of flipping a single family house. We purchased a foreclosed home in a nice neighborhood in a Chicago suburb and wanted to get the biggest bang for our buck. Here are the tips we used to renovate the kitchen for less than $7,500. The final product is shown in the picture above.
Identify the Market
The biggest mistake that renovators and home owners make is over-improving for the area. Everyone likes nice finishes, but there is a way to achieve the polished look without over-improving for the neighborhood. Before you select finishes, consider the neighborhood. What do the other houses in the neighborhood look like? What is the average range for homes in the area?
If you are looking to flip a house or just make a value-added renovation in your primary residence, make sure your investment isn’t over the top. A $50,000 kitchen renovation will not transition to profit in a home that is selling for the low $100,000s.
Find a Comparable Substitute for High End
The houses in the neighborhood were selling in the $80,000-$150,000, so we knew that we didn’t want to spend a lot on a kitchen. Yet, kitchens and baths sell homes, so we needed a kitchen that popped. We set a budget of $10,000 for supplies AND labor, and got to work.
We shopped around for cabinets and found that the most reasonable pricing was available at the local Home Depot. Originally, we were planning on buying the cabinets and counter tops at one store and then buying the appliances on Craigslist, but found that it was cheaper to buy all of the supplies at one location. We received a great deal by using the professional bid process, where contractors and other building and investing professionals can purchase a large amount of supplies and receive a discount for bulk purchases. By bidding out the supplies, we ended up saving 10 percent on the following supplies:
- Mable cabinets
- Granite counter tops
- Stainless steel kitchen sink
- Garbage disposal
- Stainless steel microwave
- Stainless steel range
- Stainless steel dishwasher
Instead of custom cabinetry, we selected the off-the-shelf model. For appliances, we went for similar finishes, but not necessarily the same brand. For example, our microwave and dishwasher were the same brand, but the range was a different brand. As you can see by the picture, they all look the same, which is all a buyer will look for, specifically in this price range. For all of these supplies, we spent $3,500: $1,500 for the cabinets, $900 for the granite and $1,100 for the remaining appliances, sink and disposal. NOTE: we originally purchased a refrigerator for an additional $900, but our measurements were off and it didn’t fit. Fortunately for us, the house ended up selling before we could buy a new one. While we also were fortunate that Home Depot accepted returns, it would have been great to follow the, “Measure twice, cut once” philosophy!
While all of these finishes were not the highest end, they provided the polished finishes that buyers in our price range were surprised to see. The key to a successful flip is to surprise your buyer. Giving potential buyers finishes not traditionally found in their price range will help your property sell quick, sometimes even with a multiple bid situation. In our instance, granite and stainless steel were not common for the neighborhood, so by spending a little bit more than the lower-grade finishes while still staying in budget, helped us sell our flip fast.
Find Reliable Labor at the Right Price
Reliable labor is the most important part of any renovation. A good contractor will be reliable, honest and talented. He will be accountable for his work, be willing to show receipts for supplies purchased, and always will show up when scheduled.
My husband and I had a bad experience with our first contractor. He over promised on the work he planned to deliver, and when it became relevant that he could not deliver on his promises, he just stopped showing up. We had to find a replacement, and fast.
We ended up using a family friend who had his own contracting business. He gave us a good rate by working nights and weekends to finish our job. We trusted him, knew his work was good, and appreciated the great price. We ended up paying $3,000 for labor.
While many people don’t have a family or friend connection to a contractor, the practices we used still can be relevant. Call several privately-owned contractors to see if they do side jobs. Be sure to check references and see if you can see a sample of their work. While working with a part-time contractor can take longer than a full-time worker, the labor is usually discounted by at least 20 percent.
Ending Thoughts and Tips
Our labor and material costs came in at $6,500. We were fortunate that the floors were original hardwood and did not need any refinishing, so that was a saved cost. However, after we were under contract on the home, the home inspection identified low water pressure in the sink. We had to spend an extra $1,000 to blow out the pipes, which had more than 100 years of corrosion materials stuck in the system. After the service, the sink worked great, and the total for the kitchen portion of the renovation came in at $7,500, $2,500 under our original budget. Having a contingency and not planning to use the full budget really paid off!
Do you have any additional tips for home renovators or property flippers? Share your suggestions in the comment section below.