The goal of real estate investing is to secure a steady stream of income, relative security, and a high return. For real estate flippers, those interested in remodeling homes and selling them at the highest possible price, home staging is the key to a quick and profitable investment.
Why Home Staging is Vital for House Flippers
Rave Home Staging’s biggest customer base is real estate flippers. Since the goal is to maximize profitability, home staging provides the ‘icing on the cake’ for a beautiful renovation. Just like any cake, the price of the cake typically has more to do with the decorations than the cake itself.
The Difference Between an Expense and an Investment
In house flipping, there is a fine line between an expense and an investment. Generally speaking, however, an investment is an improvement that will bring a return for measurably more than you paid for it.
An Investment: A kitchen remodel may cost $10,000, but theoretically, may return not only what you paid for it, but an additional $5000. That would be a 50% return on investment.
An Expense: Repairing broken tiles in the bathroom is likely to be an expense. The house isn’t worth any more than before, but this is a repair that the new buyer would expect to see, assuming everything else in the house was in good condition.
So how does staging figure into this equation?
Home staging is generally thought of, by homeowners, as an expense. Savvy investors understand that it’s really an investment. Not only is there typically a significant return on investment from staging, but investors know that they may actually be able to make fewer upgrades in the home, to attract buyers.
Kyle Passkiewicz, a real estate investor with Corner Lot Properties, advises that once they started staging, with Rave Home Staging, they no longer had to add granite, in lower priced homes, to attract buyers. They are also typically able to reduce expenses in bathroom upgrades, while still receiving the same, or more commonly more, money for each of their flips.
Obi Dorsey, owner of Freedom Real Estate Investing, routinely increases the list price of homes by more than $10,000 after professional staging by Rave. As an example, 2965 Dellwood Ave, in Jacksonville, FL (photo of staging shown above) was originally valued at $99,000 ARV (After Repair Value) when calculating the investment. After staging was complete and photos were submitted, FREI decided to list the property at $119,000. Within days of listing, they received multiple offers, and closed at full price, with no closing costs or concessions.
The cost of staging is 1.5% of list price, with a $2500 minimum. (We do offer a 20% discount, if paid in full at the time of staging.) This means, in the case above, the cost was $2500. The house sold for $10,000 more than ARV, making the return on investment $7500 more than what was paid. This means that the ROI for home staging, was 300% at 2965 Dellwood Ave!
Understanding the BIG Picture
Too often new real estate investors, or seasoned ones who are new to the concept of home staging, are quick to dismiss the “expense” as unnecessary. After all, real estate investors are always looking for ways to cut costs and maximize profits. Unfortunately, when they do this, they are actually leaving a stack of money – I was going to say “on the table”, but without staging, there isn’t a table to leave it on.