The Impact of Fixtures & Finishes on Real Estate Investment Returns

One way that we run our business and that we hope that you'll be able to steal from us is that on average, we're pretty much paying for 30% of the renovation budgets on our own. And we're controlling it ourselves. And that does two amazing things. One, it cuts out the markup, which is typically 10 to 20%, that general contractors are going to charge on 30% of the project, it actually benefits them because they don't have to cashflow you know, between 30 and $50,000 worth of materials. So whether it's appliances for the kitchen, whether it's countertops, tile, you know, door hardware, these are things that if they've got five projects going on at once, that might be 200,000 bucks in materials that they have to carry. So you really it is kind of a win win. And then most importantly is I put it all on our company credit card, we get points and we go on vacation for free every single year. So do not miss that cool little opportunity for you to get great benefit, doing the fixtures and finishes yourself. Welcome to raising the flipping bar. My name is Derrick Marlon and I've redeveloped over 80 properties in metro Denver. I've bought and sold 115 multifamily doors in Cincinnati, Ohio, and my team has done just under 300 single family rental acquisitions for our clients. On this show. My goal is to help you make more money, save you a bunch of time and create a well oiled flipping machine. 

Let's dive in. And if you want more information, head to fix and flip dot show. Welcome back. Super excited to have you guys with this episode. It's the second part of our big four of project management. And we're gonna dive into our fixture unfinished packages and our project timeline. I know maybe those last couple of episodes are a little bit in the weeds for certain people probably appeals to maybe some of those engineering brains out there. But some of the creative folks are like what are you going to teach me or help me or give me some tips or tricks on how to fix up these properties and have more of the design and the artistic side of it? Well, this is your episode, do not miss this one. Stay with us till the end, I guarantee you this will be maybe one of the most beneficial episodes in our first season. As we obviously raised the flipping bar. We're going to talk about the six fixture and finish packages of how we exactly finish out these houses. And then we're going to dive into our system, which is actually over 100 steps right now, from the very first thing you want to keep in mind to the very, very last thing getting you ready to close out your property and sell and hopefully make a nice big fat profit. So let's dive in. 

Fix your unfinished packages, there's three things that I really want to set the stage with for this episode. The first one is systems equal success. This is so key, in my opinion, too, whether you are doing a couple flips yourself, whether you're doing a ton of flips, and you've got a well oiled machine, or you've got a staff of 100. And you're doing it in 20 markets across the country systems equal success. The next one is no matter what market you're in. Obviously, we're in metro Denver, you want to appeal to the widest buying audience, you need to take your personal tastes out of the equation, you need to take your spouse personal taste out of the equation, your significant other, even your business partner to some degree, you want to appeal to the widest buying audience, no matter how great have tastes you might have it's that specific buying audience for that specific type of property. And then you want to rinse and repeat. So the way that I kind of described fixture and finish let's kind of you know, really dive in and define Well, what the heck is fixture and finish as my wife and says it's all the pretty stuff in the property. It's the stuff that helps you sell that property. 

I heard a great saying the other day, it's the sizzle, not the steak. So if we think about maybe the systems early on, and all these nerdy things that we're doing is the steak, this is the sizzle, but the sizzle really helps you sell that property and hopefully get you way above asking price. So we're gonna think about areas like kitchens, bathrooms, the hardware of what you're putting in, you know, light fixtures, faucets, anything, again, that a buyer might really stand out. And if you think about it, when somebody is out there, and they're working with a real estate agent, and they're looking at 10 properties, and everyone looks kind of the same. It all looks like the same stuff from Home Depot, what's going to make your property stand out the way we design these properties. And hopefully the tips that you pick up are going to make your property stand out. So when we say fixture and finishes think all the bells and whistles, the sizzle, the pretty stuff, even down to paint colors, vanities, all the things that buyers are going to remember, this is all about really matching up what your targeted ARV is and then what the style of the property is as well. 

So for example, when we get into our six ways we fix this up the way you're going to want to frame this is if you have a mid century modern house, which is a home from the 1950s and 1960s and we really lean towards having a mid century modern look and type of finish. Versus if you have a you know, 100 year old Victorian home, and it's in a urban area of Metro Denver, and you want to make it look very contemporary and very nice and beautiful, you're not going to make it look like a mid century and you're obviously not going to do a rental quality level of finish. So you really want to kind of match the style of home with the widest buying audience of what would they want to see in their property. Again, these are also things that we pay for directly. So kind of another cool flip tip is, the way that we run our business, and that we hope that you'll be able to steal from us is that on average, we're pretty much paying for 30% of the renovation budgets on our own. And we're controlling it ourselves. And that does two amazing things. One, it cuts out the markup, which is typically 10 to 20%, that general contractors are going to charge on 30% of the project, it actually benefits them because they don't have to cashflow you know, between 30 and $50,000 worth of materials. 

So whether it's appliances for the kitchen, whether it's countertops, tile, you know, door hardware, these are things that if they've got five projects going on at once, that might be 200,000 bucks in materials that they have to carry. So you really it is kind of a win win. And then most importantly is I put it all on our company credit card, we get points and we go on vacation for free every single year. So do not miss that cool little opportunity for you to get great benefit out of doing the fixtures and finishes yourself. So for us, what are the other winwin aspects of matching up what style of property you're trying to fix up with one of our six packages. So let's dive in and kind of give you a description of the six ways that we finish out a home. And again, I always kind of, I feel bad I bag on HGTV once in a while. There's some really cool shows on there. Obviously, we even get some of our design inspiration from the home improvement shows. But what kills me is when you see some couple walking around floor and decor or walking around their design center and saying, Oh, well, what are we going to do for this home? That's great for TV. That's not great, in my opinion for profitability. And that's not great for reality. 

So if you have a system where you can rinse and repeat, and you can have six options that should cover the gamut of what you need when you're fixing up a property. So the two most popular ones that we use is our contemporary packages, we have one that we call the black contemporary, and one that we call the chrome contemporary. And it's really just dictated by the type of hardware that you're putting in your property. So the black contemporary is we're using those in suburban areas. When you think about the doorknobs, faucets, the light fixtures, you know, the handles on the kitchen cabinets, they're all typically black metal, and we prefer matte, which is the non shiny finish, I guess easiest way to say that. And those give you just a great updated feel. Again, it's the widest buying audience, I think the most people are going to be most attracted to that level of finish. If you're leaning more in the urban core, you're doing a downtown condo or loft, you're doing a townhome, you're doing something where it's going to be more of an urban buyer, you are open to leaning towards the chrome package. And so we really kind of got a lot of these design ideas and inspirations from beautiful high end hotels. 

So if you think about staying at an awesome hotel downtown, they've got those sleek chrome fixtures and finishes in their bathrooms and their hotel rooms, we do the exact same thing. You're probably again, think of your buying audience. So you're not going to do super high end, fancy chrome fixtures and finishes for a suburban condo. In you know, maybe not condo, actually, for a suburban home in, let's say Lakewood where you're trying to attract a family of six that really doesn't jive, in my opinion typically think of the widest buying audience, but at least gives you two options for very contemporary types of finish, you're going to be doing stainless steel appliance packages, you're going to be doing quartz countertops, you're going to be doing really cool backsplash. But again, you don't have to break the bank, those types of things we're paying between five and eight bucks a square foot for your everyday properties, again, to frame this contextually in metro Denver is our sweet spot is listing properties up to about $750,000. When you go higher, we've got a package we'll talk about in a second. But we're talking between 300,000 bucks and $750,000. 

The next one is the farmhouse package. And this is one that we use probably on average about 10% of the time. And again think of it as being dictated by the style of the property. So these work really, really well in my opinion from homes from like the 1940s through the 1980s. And this was really kind of popularized by the Chip and Joanna Gaines movement. You know, the TV show fixer upper. They even have their own network now they're doing phenomenal the Magnolia network, but one of their signature calling cards is the sink. And it's really kind of funny because as an aside, it was crazy for me to see Chip and Joanna You know, get so popular so fast, I actually went to high school in Texas and I went to high school and played football with chip. And so as a funny, he's two years older than me, but it was kind of a crazy thing to say, like, gosh, I know that guy. Wow, they are really successful. But what I love about their process is they have their vibe and their style, and they kind of stick with it. And they sprinkle in little different accents. And obviously Joanne is a beautiful designer. And it has kind of that rustic feel to it, obviously, that farmhouse type field. And so a lot of these differentiating factors are going to be in the kitchen. So you're going to have that sink that has the front of it, that you can see the porcelain on it versus the countertops and the cabinets marrying up with the sink, you're going to spend a couple 100 bucks more, but typically you get a lot better bang for your buck, you're usually going to stay in the black matte type of hardware, and the fixture and finished package. 

But it's going to be a little bit more rustic, it's going to be a little bit more obviously kind of farmhouse see versus the contemporary Angular lines of the contemporary package. The other thing is in the farmhouse, you're going to be using a lot more natural woods. So in a contemporary package, you might finish the hardwoods and put a specific stain color on your hardwood floors. In the farmhouse, we normally refinish the floors and just do a natural clear coat. You want that beautiful kind of Carmel, Ron's look of the floors, you want to incorporate natural woods throughout the property. So for example, we'll do mantle's above the fireplace that will be built out of cedar wood. And it's just a beautiful accent, again, doesn't have to break the bank. But that gives you a great way to kind of differentiate your product from other people's products. Again, natural woods, think about the hardwoods just a little bit more rustic in general, as I kind of look through my notes and make sure we're not missing anything here. But you got two types of contemporaries. And you've got farmhouse, a fourth one is mid century modern. We touched on that earlier. But it's essentially properties from the 1950s and 1960s. There's a little bit in metro Denver that pulls in aspects of properties built in the 70s. But think of the show madmen. There's a very specific design element, there's a very specific vibe and a very specific style to mid century homes or mid mod as we call them.

These are really cool, because one most importantly to me, they absolutely sell for a premium. So if you do it tastefully. And this is where you want to appeal to, again, the widest buying audience, but you're probably going to piss off 20% of the purists who ironically want their homes looking like a time capsule, they don't want them touched. That's hard for me because again, I don't want to cater to 20%, I want to cater to 80%. And I'm fine with that piss off the other 20%. But in general, you want to keep to the design elements of the home, but you want to update the inner workings or the guts of the home. So you want to update kitchen cabinets. Obviously, you want to update bathrooms, but you want to do a specific style. And so with this one, you're still bringing in a lot of the natural woods, you can keep a lot of the things it almost looks like old school wood paneling, but it looks cool. In a mid century modern home. A lot of these properties also have a frames. And so they're really conducive for open floor plan and open concepts, which are fantastic, definitely want to lean towards doing more quartz, and more terrazzo type of tiles, not something that looks like it's in a farmhouse or something that looks like it's in a downtown loft, you're definitely going to be spending a little bit more on this one, but not crazy amount you're going to spend on average, in our examples three to 5%. More on a mid century. But typically you can get an eight to 10% premium on how much you're selling US homes for. Investors. 

Thank you so much for listening to today's episode of raising the flipping bar. I'm Derrick Marlin, your host and today's sponsors the elevation academy. The academy is an intensive one day training session where we teach you every single step of our system to increase your profits, find great properties save you time, avoid costly mistakes. Essentially, it is your roadmap and it's 105 step system to your fix and flip success blueprint. So sign up today, we've got an academy coming up in a couple of weeks, we only are taking 20 guests, and we've actually got a money back guarantee. So if you try our system, you put in the old college try and you don't find it slight benefit, we'll refund every penny of your money, but we'd love to have you join us for the elevation Academy. We've got info on our show notes, and we'd love to have you join us. The other telltale sign of mid century modern homes is the type of hardware that you're putting in the properties. So when you think of the kitchen, instead of your black kitchen cabinet poles, you're going to be doing a bronze type of a color, a really cool specific accent they have as it's actually called Champagne bronze. And it's a really beautiful color that works really, really well in mid century modern properties. But again, kind of think back to that madman type of era. Lighting is also really really big and mid century modern property. So it's those cool globes that was Sputnik light fixtures, those are really telltale signs that that people really like. The other great thing is you're buying him on Amazon. And they're not super expensive and they don't break the bank. But a good demonstration of how much of a premium these properties can go for. 

And Metro Denver, there's this really cool neighborhood. And it's only about six or seven blocks wide, and four or five blocks, kind of long as far as like north and south goes. And it's called Christiana Park. And the cost per square foot of this neighborhood is freaking unbelievable. I mean, we have been on and try, I've never been lucky enough to get one because they don't turn over very often. If there's anybody out there watching and you want to partner on a flipping Crotona Park, call me we will do it immediately. But properties even destroyed condition are selling between five and $700,000. And then they're selling fixed up between 800 and over a million. And these are properties that sometimes are only one level, they're 1000 square feet, or three bedroom two baths. But there are historic architects who have done properties in there, they're normally really well maintained. 

So we love doing these type of properties. It's even like aspects of that we're bringing into our CO workspace the Broadway collective. So that's the fourth one again, we do it about 10% of the time. The other fixture and finished package is our $1 million, fixture and finished package. And so that is obviously the high end level of fixture and finish. And where this emanated from is our partnership flip that we did with our clients Jesse and Rachel in 2001, where we listed the property for 925. And luckily, it ran up and sold for over a million dollars. So when you have nice homes and really great parts of town, and you're getting close to that million dollar plus price point, you really need to in my opinion, it's smart to spend extra money on your fixture and finish package. So a couple different ways that help delineate what are we doing in this package versus other ones is again, I always kind of go back to kitchens and bathrooms as the starting point kitchens, you're going to want to do nicer kitchen cabinets. So you're going to want to do Dovetail Construction, you're going to want to make sure the doors are soft, close, you're going to want to add more kind of sizzle, if you will, to the layout of your kitchen. So you're gonna want to have spice cabinets, you're

gonna want to have Lazy Susan cabinets, you're not gonna want to have just the kind of functional, you know, square boxes where you open the kitchen cabinets, and they're pretty basic, you're going to want to really kind of spend a little bit of extra money and time you're going to want to open up kitchen walls if you can to dining room and living room areas spend the extra money, where it makes sense to do that. Appliances are another big one. So our standard appliance package, we're finding that under $750,000 clients don't really care for buyers, whether it's an LG fridge or a Samsung fridge or a Whirlpool fridge, as long as it's new, it's stainless and it matches their fine. Where you really need to think about it from this million dollar packages, people are going to care about their appliances. Think, Wolf, think higher end Samsung, think Viking, you know, there's definitely some some nicer types of appliances that you're going to spend between five and $8,000. More, it's normally absolutely worth it. Also bathrooms, you're going to really want to do five piece bathrooms, meaning you're going to want to add that soaking tub, I think that's a really big selling point for million dollar plus listings. There's obviously got to be multiple bathrooms on the floor, where you're going to have a bigger family and more kiddos living in that property. So you want to just do nicer tiles, nicer fixtures and finishes nicer. You know hardware, really kind of thinking about it, maybe you go down to the basement, you're adding wet bars, you're adding entertainment areas, you're going to spend a couple $1,000 In our opinion, a great ROI area is the laundry room and the mudroom. For million dollar properties, you want a place where the kids can come in, hopefully hang up, their backpacks sit down, take off their shoes have things nicely organized. Those are really great selling points because those buyers are a lot more discerning, they've got money and they've got typically time on their hands, they don't have to jump at a property. So for you to sell those things quickly. It's well well worth it. sitting rooms, libraries, these are all areas that you want to finish out. And then in today's current times, I think there's still some element of working at home with one of the the two people typically buying the property. So having a really nice office layout. These are areas where you're going to spend more money, but in our opinion, it's going to be worth it every single time. The last of our fixture and finish package is actually the rental property package. And this emanated from the my own rentals that we have and then a lot of our clients are really big in the fix and flip space but they also want to build long term wealth. So they're acquiring these rental properties. You do not need to over improve because there's an absolute drop off in the amount of rent that you can charge no matter how nice your property is. The other thing is, is that over time it's going to get beat up. And so putting that back in those properties you're You're just going to spend a bunch of money, in my opinion, you're never going to get back. So it's stuff that actually went into flips, in my opinion, like eight to 10 years ago. 

So think brushed nickel for the hardware, think keeping everything just less expensive overall, you might be doing those Lowe's or Home Depot cabinets instead of the custom custom cabinetry, you're obviously not going to be moving walls, you're not going to be doing all the fancy bells and whistles. But just very, very basic finishes the brush nickel package, because on average, it's going to save you 10 to $15,000 per property. And you can still get the rate tax benefits of depreciating and writing those things off. Another area to save money on those is appliances, we normally are going to do black appliances versus stainless steel. So that's going to save you another couple 1000 bucks that as a renter, if it's just nice and new and clean, they're super excited. And again, these are for long term rentals. I should also clarify these are not short term rentals, meaning Airbnb and VRBO. We're trying to get a premium because it's somebody's vacation property. This is your classic renter who is going to be in there for a year or hopefully longer, but a little bit of wear and tear on the property. So don't over improve. And don't spend too much money on these fixture unfinished packages. The next thing that we want to jump into now that we've figured out, Okay, which one of these six options of how am I going to fix on my property? How do I run this freakin project on time and stick to a specific timeline. 

So for me, it's key because timelines set expectations for the general contractor. It also keeps you on time because a lot of times when you have either other investors you're working with they're using their capital, or private money lenders or hard money lenders, you need to show them that you know what you're doing, and you've got it dialed in timeline. In my opinion, it also really helps with overall profitability, and just general success of the project. So we've kind of evolved from using detailed spreadsheets to software called monday.com. So definitely check out the show notes, we'll have some links to give you guys some deals on those. But what it does is it gives you the ability to build out what they call a board. And it's a great intuitive software that we've developed where right now I think we're just over, we keep kind of adding things when we forget about something, or we have some kind of pop up for project. We're just over 105 steps, which we'll talk about here in a second. We'll probably also do a deeper dive and almost a tutorial and training on how we use monday.com. For us, we break it up into four major sections. The first section is called the project planning. Ideally, you want this done or this whole project planning part of the process. Before you actually close on the property. Sometimes a great deal comes along, or there's renters enter property and you don't get the opportunity to do that. But ideally, this all happens before you actually purchase the property. What you're going to want to do there, it's starting with things like sewer scope, roof inspections, building out your rehab budget and your scope of work that we've already talked about putting all these things together and having everything done up until one, the very first draw, which is the payment that you pay to your contractor. 

The second aspect is jumping into the actual rehab process itself. And this is going to be your entire statement of work. And it's going to be up through doing demolition, doing what they call the rough ends, which means you know, the walls are open, and you're putting in the plumbing you're putting in the electrical, it's in, you know, air quotes rough shape. But it's all the things that you need to see before you put the drywall back together before inspectors pass permits. And that's another great aspect of where you're going to have all your medium level of finished like your second and your third draws are payments that you're going to make to your contractor. So that's about 40 to 50 steps. And it's really, really important to just kind of go line by line, rinse and repeat. Even though you might go from doing a cosmetic flip to a super involved flip, what we do is we just copy and paste that same board, so you don't forget any step. And if there's not that specific step in that particular project, you just put an NA and you just move on where we kind of screwed up early on was we would do a condo, copy and paste into a single family home. And then we would forget steps. And so for this one, it's just again, rinse and repeat 105 steps, even though you might only do 80 of them on a cosmetic property, versus you might do the whole 105 Steps on a full flip. Then the next option is the material section. 

So we actually break this out separately for two reasons. One is it gives either you or ideally your project manager the ability to make sure we're not forgetting to buy anything in a timely fashion. So as we talked about before this in the fixture and finish section of where we're paying for roughly 30% of these materials ourselves, you don't want to forget and miss anything and not order it. So it's just a very, very systematic approach to everything you're going to buy. Again think of the pretty stuff for your properties. So light fixtures, faucets, kitchen cabinet hardware appliance CES. For us, we actually do use that for the countertops and pay for those vendors, the cabinets, all these different aspects of material ordering, that's super, super important so that you're dialed in and you don't forget anything. The other thing is that in money.com, you can actually make it so that you can have contractors subscribed to your board. And they can be in charge of it if you've got that level of trust there. So it's really, really important even things like paint colors, ordering stain for the hardwoods, things like that all the things that a buyer is going to care about in your material section. And then as you wrap up, so we've already got, you know, running the project itself, we've got all materials, this is actually where the rubber hits the road, in my opinion of how do you prep your properties to list them on the market, and make them sell for the highest possible price. For us, it's huge, because if either a we're doing a partnership flip for a client, where we want them super involved to know exactly what's going on, and just following us kind of digitally from afar, that's really important. 

Or it's the handoff for either you giving it to your real estate agent who's going to be listing that property, or if it's a team of people, and you need to know exactly which agent is going to be doing the finishing details. So where this is really important is is it starts with cleaning the property professionally, of paramount importance, doing a 3d tour, and then also getting the property Hall ready to list and to market the property correctly. This is also the area where you can have all of your different documentation when you list the property. Even if you've got a transaction coordinator, which is a person who helps keep all of your documentation in order. These are areas where you can just kind of check things off the list. And then in my opinion, one of the less second last steps is the recap. So we wanted to really put in notes before we you know, either want to forget sometimes or just in general time, you know, makes you forgetful of the things that were great in that particular property, the things that weren't so great, how do we improve both on ourselves and our contractors behalf? And so that's definitely a huge way to kind of keep you organized. So lastly, why is it so important to stay on track and to kind of keep you accountable? So a couple of closing thoughts for this episode. Number one is that it keeps you on track as an investor. And the timeline piece is so important because it keeps the contractors on track and on time. 

And it also really helps you guys get out of the arguing that can happen. When are people getting paid at any given points. So a lot of people pay either every Friday, or every other Friday or maybe once a month, or maybe even a percentage of completion? Well, here's the problem with that, in my opinion is if if what is your definition of 25% Complete, versus what is your contractor's definition of 25% Complete, those couldn't be two totally different things. So if you have this timeline, and you have things just line item down, it's a specific occurrence happens. And if that's done, drop payments, it also motivates them. So the they look at and go holy crap, if I just get these 10 things done, I can actually get two drawers in one week. Absolutely. Again, my favorite term velocity of money, how fast can we turn these flips over. And it keeps you in just such a better communication line with your contractors. So again, not percentage of completion it is you do a certain line item. And then you pay that contractor and move on and rinse and repeat. Okay, so just some final thoughts as we wrap up the last part of the big four of project management, which are those cool fixer and finished packages. And the timeline is to me, even if you're an experienced investor, this can save you so much time and energy and help you keep things super, super organized. We actually had a client come to one of our elevation academies, which is our one day training where we teach people every single thing that we've been talking about so far. He's in the Phoenix market. And he used 90% of what we just told you about and what we taught in his market for his own flip. 

And then even he's actually a hard money lender. And then he gave that to his clients, they took out the 10% that was very Denver centric, swapped it out for more Phoenix specific design tastes, he appealed to the wias buying audience. And they did really, really well. So again, it's all about creating a system, thinking about okay, going in, when you're buying your flip, pick one of the six packages, don't over improve and match it to the widest buying audience and you're going to be really, really great. And then it's just again, systems equals success. It's rinse and repeat. One thing that we really do is so that things don't get stale, we actually bring in an interior designer, and he or she swaps out like maybe 15 to 25% That might be a touch dated from one year to the next so that it's overall relatively fresh, but we're not reinventing the wheel and then we stick with those six things for the year. And then we do it just every single year. So it's a great way for clients to get value. But again, kind of that takeaway message is pick your fixture and finish package stick to your timelines. And that system will equal success which equals more profitability for you guys It's so thank you so much for tuning in. We've got a couple more episodes left here in season one and we'll catch you on the flip side. Thank you so much for listening to raising the flipping bar. My goal is to help you successfully and profitably redevelop properties and competitive markets. And I encourage you to listen to some other episodes on this podcast. If you're a new investor, make sure you subscribe or follow raising a flipping bar on your favorite podcast platform. And make sure to share this episode with someone you know would enjoy it had to fix and flip dot show to stay up to date with future episodes of raising the flipping bar. My name is Derrick Marlin and I'll catch you on the flip side