If a defect is found during an inspection, I too would rather a credit and do the work myself. I know that if the seller does the work, I usually end up taking possession of a house that needs me to undo their work and redo it.
I've been an electrician for 35 years and installed well over 100 ceiling fans. One house I bought brand new, the builder installed fans at my request. I have now replaced 3 of the 4 fans within 5 years; all burnt out. In all my career, I have never had to replace a burnt out ceiling fan. I should've just done them myself in the beginning.
Yeah, I've never purchased where a seller has owned for less than 2 years unless it was inherited. I'd guess my average owned period is about 14 years.
I've helped out of area investors who've purchased someone else's flip and they had ongoing problems like in-wall electrical and plumbing from all the shortcuts the flippers took. They became motivated sellers and were rescued by the strong market 2017+.
On the seller's property disclosure questions like has the sewer backed up or basement flooded or roof leaked in the last 5 , 10, 15 years, I want the seller to be able to answer those questions.
Buying a flip on market outbidding other offers is paying top retail anyway.
I expect flippers to do a poor job, which is why I don't buy flipped houses. But I do like to look at them on the MLS, and what drives me crazy is how none of them put in appliances, upper cabinets, bathroom mirrors, or shower glass.
@Imeh Esen Flippers, homeowners and landlords all cut corners. Flippers because the best returns are on cosmetics...you can give some of the blame here to buyers. Homeowners because the best return is on cosmetics and the cut corner is often expensive which is why they never fixed it in the first place. Homeowners lie, too. And landlords because again, the best returns are on cosmetics...but it really makes less sense when holding as paying up a degree for durability is usually worth it. For future reference, 1) you can float a cheap, durable great looking floor (laminate) over many bad floors and 2) heed what Greg said about the condenser stolen in a " safe" neighborhood. The neighborhood cannot be fixed like a peeling vinyl floor.
Yes the stolen AC unit was a big red flag. The neighborhood is being gentrified. Right now I can call it a C becoming B. Lots of new construction and movement. It’s not unsafe but cameras and stuff should be put up on the property. It’s also one of those where you can find a darn safe street and three streets down, not so much. That’s why the sellers agent not cutting the lawn, not showing up, with a big For Sale sign was an advertisement for theft. It was a no brainer to back out. I think I tried to salvage it because the location was perfect for my needs.
The house I’m closing on Monday is a well kept older property. My guys are doing the rehab work and I’ll be on site every day. That way I know what I’m getting. The next one after this is a complete demolition and rebuild. Again, I can control the output.
Just based on what I’m seeing, and I’m looking at lots and lots of properties weekly, it is best to stay away from flipped homes. At least for now.
They are good builders though. The first two houses I bought was from a builder. But he takes such pride in his work it’s amazing to see. People like him are rare I’m finding out. But for hold and rent like me we gotta be careful. If we start with a bad product it will be a future nightmare. With this knowledge I’ll rather go slower in this real estate market than quickly scale as seems to be the frenzy.
Originally posted by @Greg H. :
A condenser stolen in a "safe" neighborhood would be far more concerning to me
I was going to say the same thing. By definition (to me, at least) a neighborhood where someone will steal a condenser is not a "safe" neighborhood.
The cage on it should have been a big tip-off! This isn't 2009!
As far as "shoddy work", or worrying about "underlying issues", the world is "buyer beware" Never fall into the trap of trusting a seller of any type to tell you the whole truth about a house (or anything for that matter). You should always do your due diligence before committing to a purchase. Just know that your will always lose to the person that isn't scared of a few mechanical issues. There's nothing wrong with being new and careful. But the old hats know that a house is just a box with 4 walls, some windows and doors, electrical wires, a roof, HVAC, and plumbing. A kitchen is just some boxes on the walls, a sink or two, some appliances, and a pretty countertop. Flooring can and will be replaced throughout the life of a house. Laminate is literally the cheapest to install and replace. Maybe carpet is cheaper.
And if you are looking into turnkey, always realize that your profits will be lower because you are paying for the rehabber's profits. A lot of people here are advocating that you keep those profits to yourself, and use them to fund your own rehab. Most of us will advocate that.
There's nothing wrong with investing turnkey, though, especially if you are lower on cash to start -- just realize that you will never purchase anything that does not need an influx of cash to stabilize up front. The most stabilized turnkey business has something that you will have to adjust, repair, add, or address. Always!
At the end of the day, if you don't feel comfortable buying something, don't. Just walk away. Even in the tightest market, people are buying and selling Real Estate!
@Imeh Esen @Joe S. It’s not unusual to buy a house from a flipper especially if it has enough meat on it. I did this several years ago and it’s one of my most profitable rentals. The flipper was an agent who had to rush because they had 2 hard money loans (not sure how they happened). The house was in my target area and I may a cash offer. Yeah, they had a point of service water heater for the entire house, but after my additional repairs it was rented on the first day cash flowing. Doesn’t happen often, but never pass up a deal no matter where it comes from.
This may be a hint of substandard work but alluding to the notion that it´s a bad flipper based on that alone is very shaky. Things happen and there could be multiple honest reasons of how that happened. People who dont flip never understand that if you are pulling out thousands of things and putting thousands of things back, it´s very easy for something to go sideways. If you catch those things just require them to be repaired before closing. It´s very few flips that I have done where I didnt have put a final minor finished on something. It´s easy to mark all flippers as inept but a person could be passing up a gem where they decline a wonderful property based of something common and insignificant. Glue is nothing; I have seen tens of thousands of dollars in faulty wiring closed in behind sheet rock. I have seen foundation issues covered over that would cost more to repair than the house is worth. Check out some of those condo conversions in DC where they had to be condemned due to things like raw sewage leaks, massive flooding or black mold covered up with paint. There is a difference between minor stuff that needs to be repaired and shady, worthless people who intentionally mislead people to make money.
I pulled out of an investment property about a year ago from a flipper after the inspection came back. They'd obviously done the lipstick on a pig thing.
I don't understand the logic that says that you shouldn't buy from a flipper though. I'm more than happy to have someone do that renovation and deliver a finished product to me (as long as it pencils out and the work was well done) because:
1. I'm not looking to invest the same amount of time as I did on my first investments. I'm not rich, but I've made enough that I'll trade a slightly lower return for my time.
2. I'm looking for long-term plays anyway. I don't want to burn money, but over time, I don't see the extra 5-10k here or there as a deal breaker. These deals should do well in the end, anyway.
3. Most importantly, if someone else does the renovation, I can finance the renovation at 25% since I'm leveraging anyway. I'd rather pay 25% of a slightly more expensive renovation than 100% of my renovation. I know I'm not a pro, so I don't have the same smoothly running operation or economies of scale of a true professional. There's no reason for me to believe that I'd pull off the renovation at nearly the same price (or again, time - especially time) commitment that they did.
I don't even care about hitting "home runs". The world is full of people trying to get them and they can all battle it out trying to find them. They always talk about how much money they make, but rarely mention the time and effort (and possibly luck) that it takes to get to that level. Singles and doubles are everywhere, will make you rich, and require almost no effort. I'm totally fine with them and to enjoy my free time with my family.
Side note. We just bought 4 quadplexes. They're good (not great) deals. As tenants turnover, we're probably looking at about 7k per unit to get them the way we want them. That's 112k out my pocket. I'd have loved if someone had done it for me and charged 150k, so I could pay 37.5k now and the other 112.5k for 30 years at 3.625% so I could use the extra 74.5k to apply to the next quadplex...
I like how confident you are in your lane.
It was much more than just the floor. Their ATTITUDE towards it was a concern too. Then my contractor observed the cheap material used in plumbing.
The whole thing smelt off after a while. The potential headache wasn’t worth the advantage of location. But thankfully I’m closing on a property that offers the same advantage of location and was well maintained by the previous owner, although I am about to renovate it considerably. My total cost after renovation will be on par with what I was about to purchase the “suspect” property for, with more rooms and more square footage
Sometimes walking away is the best thing. A door closes so you can see the next.
None of this is unusual. Years (well, decades now) ago I went on an open house tour. The owner was a flipper (not called that back then) who, in the 60's was in some kind of a band...and made it known by posting pictures of himself and his band as part of the "decor" of the house. I like old houses and this was in the "hill" section of my town (a desirable place, although not so much now). As I was walking around the kitchen floor my foot sank a bit into the floor. Turns out there was a fairly large hole in the floor near the pantry and instead of repairing it they simply covered it with the vinyl.
A couple of months later I toured another one of his home. Same pictures, same light fixtures, etc. etc.. I guess folks who toured were supposed to be impressed with this guy.
Sometimes what allows a flipper to get away with this stuff is that often the buyers are blinded by the "bling" (fancy lighting, fancy faucets, staging, etc.) without crawling under the house or checking out the attic.
Originally posted by @Imeh Esen :
I like how confident you are in your lane.
I do too and agree on the mindset of Chris. Homeruns do not come along often, if you hit one, great, but waiting for only homeruns will likely result in your opponents getting all those singles and doubles and beating you in the end game.
I will also agree with others above who stated that this is not a 1 off situation. There are good and bad flippers, good and bad agents, good and bad attorneys, etc. To state you would never buy from a flipper may not be the right long term approach, but I have seen my fair share of crap flippers and the crap quality they produce. Makes me cringe sometimes and feel like they did not deserve the profit they made (like stealing). That said, there are plenty of us who do quality jobs and deliver quality products. Of course I have NEVER had an investor buy one of my development or flip projects on SFR's here locally as they are priced at full retail and most investors look for some equity at purchase or at least cash flow, mine would produce neither for them. Of course my market is different than most others as our price points are $1M for a basic home these days.
Good thing you walked away! Good for you.
Depends on the market, If you're in a competitive area where single family properties are expensive/ scarce a rehaber can put let detail into their work and still turn a profit.
On the other side of things, sellers that spent the last 15 years smoking pot and letting their cats pee all over the house get to list as "well maintained, move-in ready"
I have to say a lot of the responses to this thread make me cringe. First, make sure you actually read the post. Imeh didn't say the fact a piece of vinyl was coming up was the reason for pointing out poor workmanship. It was simply a very glaring example of poor workmanship. The fact that she asked for it to be repaired and it wasn't even though she was told it was but instead got worse just underscores the fact that whomever did the work couldn't be trusted. Maybe it was a good thing they failed to repair it. Had they repaired it that red flag would never have come up. Yes, mistakes and problems happen. But when they do a reputable rehabber fixes them and does it right. If they ignore it or lie about it, I would have no choice but to assume there is a lot more they did wrong.
As for buying a rehabbed house to add to your rental portfolio, what's wrong with that? If the numbers work it doesn't matter who hired the subs or swung the hammer. At the end of the day all that matters is the numbers work. Buying a rehabbed house (not this one) and immediately renting it can be a good business move.
Now for those that say every developer and every landlord cuts corners, well that tells me a lot about how the person making that statement does work. My company does NOT cut corners. We put or reputation ahead of profits. We put the needs of our tenants ahead of making a few extra dollars. We are not out of the ordinary. Most of us in this business do things the right way the first time. Unfortunately it's the few who don't that give all of us a bad name. If you think everyone does shoddy work, or worse yet you do shoddy work and think its OK, do us all a favor and find a new career path.