Where does the staging line actually live in a flip model?

Question

Every one of the small flippers whose deals I underwrite hands me the staging number in a different place. One puts it in the rehab budget as a line item next to appliances. One puts it below the line with commission and title as a cost of sale. One doesn't put it anywhere and just tells me his exit price already assumes the house shows staged.

The amounts aren't huge. On the last three deals staging came in between 2,400 and 4,100 all in, so somewhere between half a point and a point and a half of the sale price. Small enough that nobody argues about it, big enough that if it's in the wrong bucket my rehab contingency and my selling cost percentage are both a little off every single time.

Case for the rehab budget: it's a scoped, quoted, one-time spend on the property, and treating it like construction means it competes with other property spend for the same dollars. Case for selling costs: it exists only because you're selling, it scales with price and market conditions, and if the house rents instead it disappears entirely. Case for the split: install and design are a fixed fee, monthly furniture rental behaves like taxes and insurance while you carry.

I don't think there's a wrong answer for a one-off deal. Over ten deals the placement changes what your averages tell you. Curious what people who actually run the spend do.

nataliehsu · Answer

Dumb clarifying question before I vote. When you say install and design are fixed, does that mean the stager charges once no matter how long the furniture sits, and then bills separately per month? I've been reading proposals and half of them bundle the first 30 days into the install fee, which makes it hard to tell which part is fixed and which part is time.

derekj19 · Answer

@plumb yes, that's the usual shape, one design and install fee plus a monthly rental after some included period. Which is exactly why I'd put the whole thing in selling costs. Staging only happens because you're going to market. If the flipper decides to rent the house instead, the framing, the flooring and the cabinets are all still spent and staging is not. That's the test for me: costs that survive a change of exit are project costs, costs that vanish are selling costs.

devon_pierce · Answer

I'd argue the other way, @beacon. I keep it in the rehab budget on purpose because that's the only place I actually control scope. When staging sits in selling costs it turns into a percentage I never look at again. When it sits next to the lighting allowance and the countertop line, I'm forced to ask whether the 3,000 does more in furniture or in the kitchen it's furnishing, and on two of my deals the answer was the kitchen.

tonyv88 · Answer

Managed properties show this clearly: the monthly piece behaves exactly like a carry item. I've watched owners get surprised by it the same way they get surprised by a fourth month of utilities on a vacant unit. If your model has a holding cost per month with taxes, insurance and utilities in it, staging rent belongs in that same per-month number, because that's the only way an extra 45 days on market shows the extra furniture cost automatically. Keep design and install up front wherever you like.

mikeoconnell7 · Answer

Stagers quote in two parts, so model it in two parts. That's the whole answer as far as I can tell. I'm building the service side and every proposal I've written has a fixed piece and a time piece, and the clients who get burned are the ones who read the total as a single fixed number and then extend twice.

@sextant one more thing on your averages point. If you bury staging inside a selling cost percentage you also lose the ability to tell your flipper what he spent per house per year, and that's the number he'll want when a stager offers him a portfolio rate.

Where does the staging line actually live in a flip model?

5 replies