Bob knew that the house he just purchased was in a historically rough neighborhood. There was a history of gang violence, including shootings, in the neighborhood. That is probably why the house was so inexpensive. The previous owners of the house had it foreclosed. Then some house flippers bought the property for a very cheap price, renovated it, raised the sales price, and sold it. Bob thought the house was still a good bargain though.
After he moved in, Bob began to see that many of the renovations to the home were merely cosmetic. While the house flippers put in new stainless steel appliances in the kitchen, they hadn't upgraded the electrical work. This meant that every time Bob ran the dishwasher and the coffee machine, all the power in the house went out. Bob spent over $1,000 dollars to have the house rewired. The new carpets that the house flippers installed was put over the original hardwood floors. Bob decided to rip out the ugly oatmeal colored carpets and refinish the old floors. That was another $3,000.
The house was an old stucco house that got very hot in the summer and cold in the winter. The house flippers installed some cheap windows. Bob hired a contractor to put in new double pane storm windows and install ceiling fans. That was another few thousand dollars. Bob wanted to make the house energy efficient, so he leased solar panels that were installed on the roof. This not only lowered his monthly electric bill, but added value to the home.
Within two years, all the changes Bob made to the house totaled more than $20,000. In that time the value of his home rose almost $100,000. Bob felt he made a good investment. He knew when he sold the home, he would get more money than he paid.
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