Scoping a Renovation That Actually Appraises
Money spent on a renovation and value created by a renovation are different numbers. The gap is where flips lose their margin.
Every renovation decision should answer one question: will an appraiser or a buyer pay for this? Plenty of good work fails that test.
Improve to the street, not past it
Appraisals lean on comparable sales. If nothing on the street supports the price your finish level implies, the appraisal will not either. The ceiling is set by the neighbourhood, not by your invoice.
What tends to pay
- Kitchens and bathrooms brought to the standard of recent comparable sales
- Correcting deferred maintenance that would fail an inspection
- Adding a legitimate, permitted bedroom or bathroom where the comparables support it
- Curb appeal — it moves days on market more than it moves price
What tends not to pay
- Finish levels above the street's ceiling
- Highly personal choices that narrow the buyer pool
- Unpermitted additions, which can reduce value and complicate financing
Price the scope against the comparables
Pull the comparable sales first, decide the target sale price, then work backwards to the finish level that price supports. Scoping first and hoping second is how contingency budgets disappear.
Leave a contingency
Ten to fifteen per cent of the renovation budget, untouched, for what the walls hide. Older housing stock in the Carolinas frequently has surprises behind the plaster.
Next
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General information for the Carolinas market, not legal, tax or investment advice. Rules differ by state and by situation — take professional advice before acting.