How do YOU perform due dilligence? (Rehab)

Question

What is it that you look for when flipping homes?

What are some of the BIGGEST green flags when you consider a home?

What are some of the BIGGEST RED FLAGS when you consider a home?

I'm looking forward to hearing all of your opinions!

Michael Seeker · Answer

Green flag - ugly paint job.  This scares away retail buyers big time, but it's such an easy and transforming fix.

Red flag - neighbors.  I made the mistake of buying a great flip next to a house that regularly had 6+ ugly cars parked in front of it.  Needless to say, it took me 6 extra months to sell the place and it was not a cheap lesson to learn.  As a rehabber, I was focusing really hard on the numbers, but an undesirable neighbor can easily lose you 10-20% on your ARV.

Aaron McGinnis · Answer

Red flags: 
	* Location
	* Topography
	* Lot characteristics
	* Title issues
	
	Location meaning -
	* Neighbors
	* Shopping
	* Main street (I won't buy on a main street)
	* Comps
	* Crime
	
	Topography meaning -
	* Excessive slope or excessive flatness... neither of which are cheaply fixed
	* Flood zone or not
	
	Lot characteristics -
	* Easements
	* Setbacks
	* Access
	* Size
	
	Title issues -
	* IRS liens, FIFA liens, etc... basically government leans that I can't do jack squat about.
	
	Everything else about a house, lot, or title I can remedy if the price is right. 
	
	And the caveat here is that for the right price, with the right spread, almost anything can be overcome... bad lot? move dirt with a bulldozer. Easement? Spend time and money altering it. Zoning? Time and money. Setbacks? Time and money. Main street? Buy the whole block and fix it... lol.
	
	But generally I don't want to deal with all that stuff, so I just say no. Too many fish in the ocean to spend a lot of time dealing with the tough nuts.

Luis Orts · Answer

Well Mr. McGinnis, I agree!

I think that as Real Estate Investors, we're out there buying properties in our markets to solve problems most people wouldn't! So I'm enjoying the feedback! Thanks!

Don Hines · Answer

Red Flags:
1. No grass on the front lawn or neighbor's. It indicates lots of traffic (drugs, booze,ETC).
2. Sloped lots and driveways. It has turned away buyers before.
3. "Homemade" improvements or repairs.

Green Flags:
1. Severily neglected maintainance items. IE soffits, siding, ETC
2. Bad roofs
3. leaking shower pans.

Just to name a few
Don

Luis Orts · Answer

Hey, thanks for your responses!

I'd love to hear what anyone else has to say!

Sean Kuhn · Answer

Green Flags: Like @Kerry Edwards said surface mold, I love love love surface mold. Scares so many people away and really is an easy fix.

Red Flags Major foundation and structural problems. Not usually easy fixes

Kerry Edwards · Answer

Green Flag: surface mold (sellers always know its a non starter for some people), minor foundation issues ( buy price goes down).

Red Flag:

1.as @MichaelSiekerka said bad neighbors. If you are a buy & hold guy or a fix & flip bad neighbors will cost you money. So if its a project that you are set on doing don't forget to discount your buy price. Figure 15% less rent and at least 10% less on exit.

2. 3 or more boarded or vacant houses in the same block. Unless you are to the point that you can turn the whole block.

3.Looming sewer/water assessments. Some cities have pockets where the houses have never been connected and are still on a well and septic. Most of those cities have now made it mandatory to be on city services so there will be a $15-20k bill coming at some point.

How do YOU perform due dilligence? (Rehab)

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