In Real Estate Variety Can Be the Spice of Failure
It really bothers her. At the Olive Garden I always order lasagna. At Taco Bell it’s a tostada and three tacos. The Outback Steakhouse has to be a rib eye with broccoli and a glass of red wine. When we eat at our favorite neighborhood bar and grill, my go to meal is the honey barbeque wings and salad. Every pizza I eat – dine in, take out or delivery – must have sausage and pepperoni.
My wife says it’s boring. Don’t you want to try something new she always asks?
No, I don’t. I know what I like. Imagine how disappointed I’d be if I ordered something different and it was awful. The regret would be unfathomable. My mind would be full with thoughts of what could have been. And my stomach would be empty.
I have a similar appetite when it comes to buying distressed fix and flip properties. I want the same thing every time – newer homes with at least 3 bedrooms, 2 bathrooms and 2 car garage. They must have a tile roof and stucco exterior. The fewer repairs the better. I’m not into fix major plumbing, electrical or structural problems. I paint them the same color and use the same carpet, tile, appliances, blinds, fans, door hardware and light fixtures. My properties even smell the same – I buy cinnamon apple pie air fresheners in bulk.
That’s because I’ve learned that in real estate investing variety can be the spice of failure. By keeping everything the same I stay focused, and on budget.
But lately what I want hasn’t been on the menu. Houses that fit my buying criteria are getting bid up too high at trustee’s sales. Short sale and REO inventory levels are very low here in Phoenix. Competition is intense.
So I decided to try something different. A Realtor I know brought me a deal that, on paper, looked very solid. It was built in 1979 with an asphalt shingle roof. An addition was built a few years ago increasing the livable space by about 900 square feet. My buy price was $121,000 and in good condition I could flip for around $200,000.
On Tuesday, I met an inspector at the property and I paid him $155 to do an “investor” inspection. He went through the entire house and I didn’t like what he found. Mold, termites, electrical problems.
And the room addition? Let’s just say I’ve seen my daughter build sturdier structures out of waffle blocks. The inspector explained that it is settling faster than the original home. And since they are connected together at the roof trusses the whole west side of the house is starting to collapse. Several of the trusses were starting to split apart.
For me, buying a house in this condition would be like ordering the salmon at Outback Steakhouse. It just doesn’t feel right. I know now that older houses and major repairs just aren’t my thing.
If you’re just getting into real estate investing it’s important to determine as quickly as possible what feels right to you. Maybe you like doing the major renovations. There are investors that prefer big remodel jobs in historical districts. I know a guy that likes really small houses he can fix up inexpensively and rent out.
Find a niche, a neighborhood and a profile property. Set guidelines. Keep in mind that variety is good if you’re looking for place to eat. Apply it to your real estate investing business and it could cause indigestion.