Gearing up for your first rehab? Whether it’s a flip or BRRRR, I’ve got earth-shattering news for you that will change everything you thought you knew about value-adds in real estate: If you’re trying to build equity for leverage or to cash out and want to get the best bang for your buck, forget the roof, new furnace, kitchens, or bathrooms. You need to take it outside and spend some real money on landscaping.
But everyone knows kitchens and bathrooms are where the big money is made, right? Don’t get me wrong—you should update kitchens and bathrooms, but we are talking return on investment (ROI) here. Kitchens and bathrooms are high-expense, high-return areas. Landscaping is a low-expense, high-return prospect. You’ll get a better return on landscaping than you will any other rehab expense.
First Impressions Count
People ask all the time how much value-add there is for a new roof or HVAC system. Of course, the value of the house will increase if you go from a roof full of holes to a new roof, but that doesn’t really give you ROI. People expect a roof to function when they buy a home. They expect the furnace to work—that’s not a value-add proposition.
When you are rehabbing a property, the goal is to get a better return on your investment than the 1:1 you get from functional, nonaesthetic items.
I’ve flipped my fair share of houses, and I’ve helped investors sell their flips many times. It’s almost like an epidemic—they make the inside of the house beautiful and then say they have no money left over for landscaping. I’ll make suggestions; they’ll refuse.
The listing photos of the interior look amazing, and people roll up and get confused that this beautiful interior is connected to this terrible exterior with a lawn full of weeds and gravel. The truth is, if people are turned off by the front of the house but you’re still lucky enough to get an offer, you’ll likely be paying double or triple the cost of landscaping in concessions.
With a reliable contractor, in many markets, you can spruce up a lawn and add a sprinkler system, some weed barrier, permabark, bushes, and flowers for $5,000 to $10,000. The ROI, in most cases, is going to be at least 2x. Heck, if your property looks so bad from the exterior that you can’t get offers, the return will be far more than 2x. You could almost view it as an infinite return.
There are buyers who are very discerning, especially in higher-end markets, and they don’t care how nice the interior looks if the landscape is a mess. They just won’t make an offer. If you are shooting for a price point in the upper 50% of the mean sale in your market, you can’t afford to not landscape.
But Wait a Minute
“I’m just doing a BRRRR, so as a rental, I really don’t care about getting offers.” Oh, my friend, you need to landscape, too—it’s at least as important on a BRRRR as it is on a flip.
Trust me: Appraisers are also people. Even though they use formulas and everything they do is “objective,” they’ll get a feeling about you and the quality of your work as soon as they pull up to the house.
I’ve had many a conversation with an appraiser who claimed their numbers were objective, but went on to tell me that they felt the quality and scope of a project were subpar. It’s important that they get a good vibe when they pull up to the house, too.
The Bottom Line
The next time you are looking at a rehab, regardless of your exit strategy, don’t leave out the landscaping. You’ll be shocked at how great it is to make a place look with just a few bucks and some sweat equity. I’m a firm believer that some small bushes, flowers, mulch, and landscape borders can be the best investment you make on a property. Put aside 5% of your rehab budget for the outside of the next house, and you’ll be a believer soon, too.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
