Cosmetic Renovation Investment Strategy
The cosmetic renovation strategy is a common amongst investors. This means doing renovations that are visual in nature, and are like makeup for your property. This strategy involves purchasing properties below fair market value, performing simple cosmetic renovations, refinancing the property (to take out as much of what has been invested), and then holding the property for long-term cash flow and appreciation.
The key to the renovations is not getting into the “guts” such as plumbing, electrical, insulation, and HVAC. Avoiding the “guts” the investors focus is on relatively cheaper repairs that increase value without doing too much work. The ideal property is sound structurally, but doesn’t look very nice. Doing renovations that are cosmetic helps the investor to get more “bang for their buck”, and to focus more time on identifying undervalued properties. Below are ten examples for cosmetic repairs:
Painting Walls, Door, & Trim.
Replacing Damaged Flooring.
Converting a den into a bedroom (i.e. adding a closet and receptacles as required)
Trim and Moldings.
Installing Décor Receptacles and Cover Plates
Replacing bathroom fans.
New light fixtures.
Replacing Kitchen and Bathroom hardware.
Replacing vent covers.
Thorough cleaning including steam cleaning of carpets.
Lastly, to minimize costs and maintain control the investor should act as the general contractor and hire sub-trades directly and purchase the materials. It will take time and effort to build the right team and suppliers, but the time and effort is well worth it. As the investor gains experience they will become better at adding value with less money.