3 Ways to Prevent Scope Creep in Fix-and-Flip Investments

“Maybe if I knock down this wall …”

“A window might look even better here …”

“I bet if I install marble countertops …”

And before you know it, you’ve added weeks of work and thousands of dollars to your fix-and-flip project.

Scope creep is insidious. From the examples above to smaller things like adding a built-in bookcase or kitchen island, you can easily chip away at the return on your investment. While some TV renovation shows make it seem like those features will increase the after-renovation value of the home, oftentimes they will not.

So when you’re getting ready to do your next fix-and-flip renovation, here are some things to consider to help you avoid scope creep.

Get a Licensed Contractor for Your Fix-and-Flip

This might be obvious to some people, but it bears repeating. If you don’t hire a licensed contractor, you’re risking a lot. Besides mitigating legal issues and insurance risks, working with a licensed contractor will help you ensure that the project is done to code.

Building consultant. engineer and contractor discussing material specification from client in construction site area.

How does that help you avoid scope creep? If the renovations are not done to code, you risk failing the inspection and having to start some or all of the project over again. That means additional material and labor costs as well as a longer wait until you can put the home on the market. With today’s rapidly fluctuating property values, you could face a lower after-renovation value than the one you budgeted against.

Add Padding to Your Renovation Budget

It doesn’t matter how thorough you and your licensed contractor were when creating the original scope of work — you’re not going to catch everything during the initial walkthrough. When those surprises pop up, you don’t want to lose time trying to get additional funds. That time is costing you more money (and your sale price could take a hit, too).

Be prepared to move quickly on fixing surprises by adding a buffer to your renovation budget. An additional 15-20% will suffice. For example, if you calculated the renovation costs to be $40,000, budget at least $46,000.

Don’t Try to Create the Best House in the Neighborhood

Here’s something to remember: Besides square footage, adding more to a home does not always add more to its value. And even adding square footage is not always a sure thing.

Your renovations should at least be at the level of or just above comparable properties in the neighborhood. However, if you start thinking about adding more, you should ask yourself, “Is this making the home clean, safe, and functional?” If the answer is “no,” then don’t add it to the scope of work.

That being said, if you really need to put your flair in the house, do so in kitchens and bathrooms. While it won’t always add value to the home, it does attract buyers, which could expedite turnaround time.

Kitchen sink detail shot with a subway tile backsplash, granite

Remember This to Avoid Fix-and-Flip Scope Creep

If you want to avoid scope creep in your fix-and-flip real estate investments, what it boils down to is this: Plan for the middle and prepare for the worst. Don’t overdo it on your renovations and instead have funds set aside for the inevitable surprises.

It doesn’t matter how amazing the house looks if you don’t make a profit.

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