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5 Simple Ways To Know If A House Is a Good One to Flip

by Michael LaCava on March 16, 2014 · 17 comments

  
Good house to flip

Flipping a house requires you to do a lot of things just right.

And this includes identifying a house that has some hidden value as well as looking for certain core features.

The “gurus” all claim that you make all your money the moment you sign the paperwork and officially buy the house.

True…but having said that, none of that really matters unless you know what to look for in a house.

Although this list below is not exhaustive, there are five features that can tell you if a house is “the one” – but bear in mind, that doesn’t mean that you should purchase property solely based on these features.

Remember that you should never overpay for a house and always remember the house flipping rules. If the numbers don’t work, better move on to the next one.

Bear in mind, we break these rules sometimes when the numbers are stupidly silly good…but those deals don’t come up all the time…so keep these five things in mind when you’re first starting out flipping houses.

1. Major Structural Problems

Yes, house flippers make money transforming shabby looking houses into something esthetically pleasing. It’s one thing to fix a few broken windows, fix peeling paint and revamp a driveway but structural problems are something else.

Not only is fixing them costly but it means you will be rebuilding the house. A shabby looking house with no structural problems has more value than a neat looking one with structural problems.

Leave the houses with serious structural issues to a house flipper with more experience…as these are real gems. When you’re first starting though, avoid the ones with cracked foundations and serious environmental issues.

2. The Location Of The Property

The location of the property is important because it will determine how much the house will sell for. If you choose to buy property in an impoverished neighborhood, you can only make so much from a house flip.

The best scenario is buying the worst looking house in the best looking neighborhood. Tougher to find, but these are the really good buys.

Sometimes it makes more sense to buy property in a good neighborhood where you can increase its overall value to meet the standards of those around it. These are the ones that likely have more competition, but are worth it as long as you keep your ARV in mind and really know your numbers.

3. Features Near The Property

Certain features make the value of a property fluctuate as well.

These can include proximity to heavily trafficked areas, factories, power plants or newly developed commercial areas. Desirable settings would be lake front or beach front property obviously.

Although you may not be able to snag a beachfront fixer upper on your first flip that fits your numbers, you want to stay away from nearby features that may delay the sale of the home.

After all, the faster you can sell, the more profit you make.

4. Reputable School District

For most of our flips, we sell to first time homebuyers. This may be couples with kids or with kids on the way, so school district reputation is an important selling feature.

Most families looking to buy new homes have at least one child or are planning on having one, so they are likely to look for a house in a reputable school district. Reputable school districts increase the value of a home significantly so this should also be one of the things you look for when looking for a house to flip.

A reputable school district can also be a deciding factor when you have two houses in different towns going for the same price. Even though sometimes you may not have a choice and you have to choose whichever real estate deal you get, you should know that property prices change because of the reputation of the school district.

So make sure you understand these things before you buy.

5. Less Competition

Finding deals that other real estate investors don’t know about is a huge key to our success.

We use a variety of old school and new school techniques to find properties other investors simply don’t know about or simply wont touch.

If there are many other investors all bidding ont he same property that you are, you’re likely to get outbid and not make the number work. If you go direct to homeowners, this changes all of that.

 

If you’ve gone this far, please leave a comment below! What other things do you look for when you search for flips? Let me know by making a comment below!

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{ 17 comments… read them below or add one }

Jason's March 16, 2014 at 6:33 pm

Nice work on This post.

I wonder, does the idea of buying directly from homeowners work for agent/investors? I am going to get my license in the next month. I was under the impression that you kinda have to get another agent involved due to ethical concerns, which adds 3% to the price and probably more than that once they start tryin to earn their pay…

Reply

Michael March 18, 2014 at 6:00 pm

Good question Jason. Many investor’s I know got their real estate license for many reasons. I chose not to because I wanted to be just an investor and avoid any possible conflicts, disclosures, legal issues…..However that being said many have their license and there are advantages in having it as well. If you get it you can always offer the seller two options to work with you as an agent or as an investor. This way you can disclose to them but at the same time empowering them with choices to help make the right decision for them. Remember to always put yourself in the sellers shoes and this business is not just helping them as much as it is about helping yourself prosper at the same time. Win-Win. You can always talk to other investors with their license in your area to get their feed back as well. Hope this helped & feel free to ask me more questions if not.

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Dena March 16, 2014 at 6:45 pm

This was so very helpful Michael! Thank you!
I love that you are linking other articles in it as well!
Thank you for sharing! I am new to REI and new to BP but loving it so far…
Quite overwhelming, but just trying to breathe thru it and keep the faith that I have been brought to this point in time/life as it should be!

Take Care,
Dena Price

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Michael March 18, 2014 at 6:04 pm

Hi Dena
Happy you found it helpful. It can be overwhelming I know. It wasn’t too long ago I felt just like you.
Take small steps and take action everyday even if it is little steps. Right down your goals and take action immediately. Whatever that might be for you. Going to a REIA event, visiting a BNI, attending a chamber of commerce meeting, calling 3 realtor’s, calling 3 bandit signs, taking a sucessful real estate investor out to lunch to ask questions…..I could go on but I think you get it. Love to hear how you make out.

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Matt S March 17, 2014 at 12:14 pm

Very nice article. Simple and effective.

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Michael March 18, 2014 at 6:04 pm

Thanks Matt!

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Frank Iglesias March 18, 2014 at 12:55 pm

Good reminder to all investors!

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Michael March 18, 2014 at 6:05 pm

We all need reminders Frank and get back to Basics once in while as well.

TY

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Shaun March 27, 2014 at 8:03 am

It is very true that new investors should take this advice to heart.
While there are certainly deals out there that will totally fly in the face of this, they are not easy to convert to great profits.
Unfortunately going after these types of houses (Mostly cosmetic repairs with at least some of the locational advantages you mention) will also be the ones with the most competition. Be it listed or off market.
I think that is one of the reasons a newbie will use “eraser math” to justify a high offer.

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Michael March 27, 2014 at 4:51 pm

Hey Shaun. How have you been. Haven’t seen you in a while.
When your coming to the meetup of maybe we can get together if your down near the cape anytime or I am up that way. Some of us have been talking about putting together a meeting with PA investors to share experiences…….You interested.\
You can email if you would like.

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Shaun March 28, 2014 at 8:50 am

I think if I left now I might be able to get to the meetup on time. :)
Once my parents are back form their FL thing I can probably coax them to come visit the kids so I can get out of the house early enough.

I heard a couple people talking about getting together this Spring up here so not sure if that is what you are talking about. I would definitely be interested in anything you are arranging to pick each others brains about our experiences though.

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Michael March 31, 2014 at 3:53 pm

Sounds good lets stay in touch.

Stephanie March 27, 2014 at 8:38 pm

“Finding deals that other real estate investors don’t know about is a huge key to our success.”
Curious how you do this… yellow letters?

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Michael March 31, 2014 at 3:55 pm

Yellow letters is one of may different ways Stephanie. Click the link below for more.
http://www.biggerpockets.com/renewsblog/2013/09/01/rejuvenate-house-flip-dealflow/

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Junior S April 2, 2014 at 8:39 pm

Great insight, Michael! I’ve done some wholesale deals and I think I want to try a flip this upcoming year and tips like these help alot!

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Michael April 3, 2014 at 3:04 pm

That’s great Jason. The experience will help and if you wholesaled to investors then you must of got the #’s right or the investors would not have purchased the properties from you.

Where are you wholesaling?

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Michael April 3, 2014 at 3:05 pm

Sorry meant to say Junior.

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