When you are buying to flip or Brrrr, what issues with a property would cause you to walk away? In other words, would you never rehab a home with foundation/structural problems? Are some things just not worth repairing? Who is the most important person you trust with determining these things? Is it your agent/deal finder’s own observations or does it usually take your contractor or inspector to find the big problems? Are there certain things you can see in pictures that are big clues? Would love as much advise as possible on choosing the right properties to rehab. Thanks!!
It’s all about the numbers. Usually the bigger the problem the better the deal. If you can make repays and the numbers still work then your good.
You can walk the property and look at pictures for big issues but you should get a property inspection done and bring in the appropriate contractors to assess and estimate repairs for any issues.
@Kyleigh Morgan - I'll echo what @Greg Dickerson said. All problems are worth dealing with if the numbers work. Structural problems will scare away most investors, meaning there's a smaller pool of people trying to buy the house. Less competition will drive the price of the house down, meaning the buyer is getting a better deal. The question is, how does the cost to repair the foundation effect your rehab budget, and thus, you're overall project budget?
My peers have it right, figure it out in your budget and if it is a doable rehab where you can get all your cash out after then it is worth the shot. I would advise against doing a structural renovation as your first shot though, that's a large undertaking that is not for the light hearted.
@Lien Vuong @Michael Ablan @Greg Dickerson thank you so much for your advise! Would you say there are any obvious signs that likely indicate something is not worth touching besides just numbers? For instance, The town I want to rehab in has a number of people in town that do house flips. There is a distressed house on the market for sale (not foreclosure) that looks in really rough shape. It’s been for sale for over a year. If all the numbers look good at a glance or on the service, are these factors red flags to just move on or are there other things to look out for that are signs to keep looking? Like, I know when I am buying a car, if the craigslist add says something like....1987 Volkswagen bus with 80,000 original miles....and its been listed for months...that it’s probably not worth going to even look at cause if it was a good deal it wouldn’t have been sitting on the market for that long....is there anything like that that you encounter when you are looking for deals? Sorry if that was a terrible example or a long drawn out question, and thank you again! 🙏
If the numbers work its all good but i do stay away from problematic structural issues and I stay away from basement dampness issues. I had a big issue with a tenant regarding basement dampness and it was costly and mentally exhausting. Basement water intrusion and dampness is like kryptonite to me.
As noted above, if the numbers pan out then you can make it work; but I want to echo what Anthony has said in regards to major problematic structural issues - additionally, the environment can play into this as well; what kind of land is the house located on? Is there a reason those other house flippers haven't put in a ton of offers and that it has sat for so long on the market? Be sure to ask as many questions as possible in your due-diligence phase. The last thing you want to do is purchase a property and then get hit with an EPA fine. But again, as noted above, I'd also advise against doing a major structural renovation as your first shot. There's still a lot that can come up that, if you're newer you might not anticipate. Smart people learn from their mistakes, wise people learn from the mistakes of others. I'd be cautious about such a large undertaking this early on but do what is right for you and what your business goals are! Best of luck to you! @Kyleigh Morgan
@Rob B. Thank you for your advice! You’ve been very helpful! :)
Personally, we avoid foundation issues but as others have said, if it pencils out... We tend to avoid mold issues too. We once looked at a house that was only about $30k off market for a decent if dated duplex. Not only was most of the interior trashed on the first side we looked at but the whole basement was full of mold. We never made it to the second side. We didn't even stay long enough to determine if the mold was a leaking pipe or a basement water intrusion issue. For such a small discount off market it wasn't worth figuring out. The duplex had been on the market for quite some time with no price reduction so apparently they weren't entertaining low ball offers.
We also watch for other potential environmental issues. Some day I'll write about the chicken house. That one could have ended up requiring a tear down.
Septic systems can be a problem. I have had septic systems for most of my adult life so know quite a bit about them. I'm very cautious with those since even if the current system is gravity fed you may not be able to keep it if you are pulling permits or it has an issue. Also if the drain field is trash and you don't have anywhere to put the new one you could be out of luck altogether. One my personal houses I had to do $2000 worth of drainfield upgrades to pull a permit despite the fact that the drainfield was working fine, building codes had changed.