Charlie Brown once said “There is no problem so big it cannot be run away from.”
Little did you know Charlie Brown was giving out great real estate investing advice!
When you put together a deal on a property make sure you have some time to do your due diligence free from the emotional stress and strain of price negotiations. On typical deals you will have an accepted offer that is conditional upon a few subjects. During that period of time you are usually able to better assess the deal in a calmer mind set and sometimes you’ll discover the deal doesn’t look as good as you once thought.
Unless you have a really good and well thought out reason for skipping this conditional period (for example, you are bidding on a foreclosure or a tax sale and you did all your due diligence in advance) it’s a good idea to always have it. During that time you can have the property inspected, take other people through the property (like potential buyers if you’re flipping or potential renters if you want to fill it fast), you can run the numbers in various scenarios and you can just take a step back and make sure the property fits within your goals.
Once you start doing this extensive research on the property you may find that you’ve got a real money pit on your hands … and if that is the case you want to make sure you’ve given yourself plenty of ways to head for the hills as fast as possible.
Signs of Do It Yourself Done Badly
We recently discovered a house that seemed ok on the surface but as we dug deeper and deeper into the property we felt it was just such a problem that was worth running away from. A few of the issues that came up after we had an accepted offer:
- Fresh coats of paint covering up rotting wood. A quick key gently poked into a deck post or a garage door where the paint is peeling will help you spot rotting wood covered up by paint. The key should not easily go through the wood and if it does that means the wood is rotten. On it’s own a little rotting wood is not a big deal but when it’s been covered up by a fresh coat of paint I, personally, always wonder what else has been hidden from view.
- A leaking shower. Initially we used this to reduce the price by an additional $4,500. We figured we might even be able to fix it for as little as $500 but asked for a lot more because there was the chance that it could cost us more if the issue was bigger than we could see. There was nothing in the shower or the bathroom that led us to believe the shower was used very often (no towels, shampoo, soap or other indicators of regular usage). We all said: How bad could the damage from the leak be if the bathroom is never used? Quite likely the home owners knew about the leak and eventually just stopped using the shower because it was leaking. Maybe they weren’t trying to hide the leak but nobody had been upfront about it either.
- Stairs inside and outside the house that were very steep and not well built. The stairs on the deck outside were definitely not built to code and the deck was not built with a permit. We would prefer the work to have been done with a permit but that’s not a deal breaker for us. The bigger problem is how poorly built the inside stairs were. It makes us wonder who built the home and who did the work after wards. Neither party appears to have done things well. When a home isn’t built right from the start that can mean a whole lot of issues that come up over time.
- Damaged siding where new windows had been installed leaving the home exposed to water and sunlight. Also not a big issue on it’s own but just another sign of poor workmanship and do it yourself kind of repairs.
An issue here or there with a home is to be expected but when you have a bunch of problems you can see (especially when some have been hidden by fresh coats of paint or clever placement of belongings) that indicate poor work has been done on this property from the beginning, the next question is: What can’t I see?
Which is why Charlie Brown’s words come to mind … and why this problem was not too big we couldn’t run away.
Snoopy’s words also come to mind “Yesterday I was a dog. Today I’m a dog. Tomorrow I’ll probably still be a dog. Sigh! There’s so little hope for advancement.”
Give yourself time to calmly assess every deal and look at it objectively. Look at the numbers but also look at the quality of the property and the work that has been done. You just mind find the odd dog of a deal you should run from. And if you’ve set yourself up with room and time to do this you’ll be able to save your energy, money and time for the good deals. It will also help you avoid you telling a story like Charlie Brown did:
“Sometimes I lie awake at night, and ask, ‘Where have I gone wrong?’ Then a voice says to me, ‘This is going to take more than one night.”