The basic premise of house flipping seems like a simple enough business model. Buy an inexpensive house that requires renovations, make them, and sell it for more than you invested.
However, it's important to remember that house upgrades and structural repairs are worlds apart. A savvy house flipper would be wise to understand the difference and steer clear of structural renovations whenever possible.
Construction professionals take a broad understanding of what constitutes an upgrade or cosmetic renovation. The latter usually refers to items that most DIYers can carry out without a professional. Things such as painting walls, replacing cabinet hardware, grouting bathroom tiles, and other routine changes fall into this category.
A home upgrade usually takes more effort and skill to perform. Removing and replacing kitchen cabinets or reimagining an expansive bathroom generally counts as an upgrade. Many of these renovations require skilled carpenters, electricians, and plumbers among others. They don't just change the complexion of an existing space. Upgrades substantially alter a space's appearance in a positive fashion.
A structural renovation often involves changing the layout of a home. Construction crews may tear down entire walls. This may include what is known as a "load-bearing" walls which then task the contractor with inserting new support systems throughout the structure. There are times when house flippers might consider structural changes to increase property value in the following ways.
While the outcome may seem to fit neatly into the house-flipping model, entrepreneurs may want to consider the potential downside of structural changes.
One of the under-the-radar issues with structural changes stems from local building codes. In some municipalities, securing a permit to make these renovations requires an engineer to sign off. A structural engineer can charge anywhere between a few hundred dollars to thousands.
Proposed structural changes can also trigger other code requirements. While many existing buildings are considered grandfathered-in with previous codes, structural changes can void that designation. Tear out a couple of structural walls, and house flippers may be looking at upgrading staircases or installing steel girders to support old floors. In almost all cases, structural renovations will be expensive and complicated.
How do you tell if something is load-bearing or cosmetic? Homes typically have multiple examples. Those that comprise closets or run parallel to floor joists are typically non-bearing or cosmetic walls. Exterior walls almost always carry the load of upper floors and roofs. Interior walls that run the same direction as basement supports are often load-bearing ones. Other items such as foundations and beams also provide structural integrity. When a house flipper pictures a living space in which these are altered, they will also need to invest in a solution.
Structural changes tend to be cost-prohibitive on many fronts. If you are considering a fix-and-flip project, it may be in your best interest to stick with cosmetic updates and non-structural renovations. They make it easier to turn a profit and not trigger unexpected expenses.
Kathy Borawski is a Northampton native who started in the Real Estate Industry in1985. She is a product of the Northampton public schools and a Northampton taxpayer, landlord, and co-founder of HARP, The Hampshire Association of Rental Properties, and a 3rd generation real estate broker, having learned the business from her father.
