When looking for details on how to flip a house it occurred to me that there must be a list of things that the experienced flipper will avoid. This is the type of repairs or damage that can be too costly or financially involved and should be avoided when looking for a profitable flip. Experienced flippers may be able to price out the issues and still end up with a profitable project.
What things should be avoided when flipping a house? Avoid houses that are located on a main roads, far into the woods or in high crime areas. Also avoid the largest house in the neighborhood as well as homes with heavily damaged foundations, concrete and interior rooms.
The saying goes Real Estate is about “Location, Location, Location” and the avoid list starts off with exactly that. Single family homes located on main roads tend to be harder to sell since the first thing the family imagines is their kids crossing that busy street. Another tough sell is the home located at the end of a dirt road far back in the woods.
IN THE BACK WOODS
That simple looking 1000 sq foot home located in the woods off that dirt road (or dirt driveway) can be defined as ‘quaint’ or ‘cozy’ or ‘charming’ but it will be a tough sell when its time to flip. The average buyer is not looking for the backwoods home with limited access to water, sewage or internet.
For the new flipper this is a house that may involve multiple challenges regarding the repair and curb side appeal. Although possible, it will be tougher to find a buyer for this type of house.
Also, in these types of situations appraisers have been known to reduce the value of a home due to the locations and dirt road alone.
THE BIGGEST HOUSE
The largest home or most extravagant in the neighborhood will have a smaller price per sq ft due to the lower number of comparable homes. Unless there is a large margin, it will be tough to perform repairs and sell the home at a “higher than market” price if this home is the highest.
Add-ons and repairs will most likely cost more as well as any additions that might not be popular in the neighborhood. This could include pools, decks, additional square footage etc.
The flipper mentality is to get in and out with a profit as quickly as possible. This means focusing your time and budget on the lower priced (by sq ft) in the area as they will sell for closer to the market value of the neighborhood.
MAIN ROADS
The primary customer for a single family home is exactly that, a family of x where x is usually a number of children. When a house is located on a main road there is the concern that the children will be limited to where they can roam and play. On side streets there is less traffic and the neighborhood usually includes both sides of the street.
A busy main road can also be a challenge to pull in and out of during rush hour or on a busy Saturday. I have been there where you need to move 2 cars out into the turning lane of a main road to let Dad out of the driveway and then everyone piles back in. Not to mention the constant noise from daily traffic.
Family’s will tend to avoid these houses and even if they do show interest, the location of a main road will cause them to make lower offers especially in a buyers market. The experienced flipper may be able to factor this into their budget but the new person should probably avoid.
BUILT BEFORE 1978
Lead based paints were banned for use in housing in 1978. According to the CDC, “houses built before 1978 are likely to contain some lead-based paint.” The “Renovation, Repair and Painting (RRP)” program states that firms performing repairs need to use a certified renovator trained and approved by the EPA. They will follow lead-safe work practices.
The flipper will need to use a contractor that is certified to perform this work and include that additional cost when looking at their budget. Also consider that any large demolition may cause issues if breathing in lead during the remodel.
BAD NEIGHBORHOOD
A neighborhood can be “bad” for many different reasons in addition to the obvious crime rate. Criminal activity is reported and can be viewed on many websites and real estate sites where they display crimes, sex offenders and the neighborhoods general crime statistics.
There are several websites that offer buyers access to the local police reports and a summary of the crime in that area. Buyers will use these website to identify high crime areas and avoid looking at houses there.
There are cases where flipping a low cost single family homes have brought in buyers that better the neighborhood.
FLOORING DAMAGE OR FLAWS
Flooring can identify a poorly managed or repaired house. There are many complaints of repairs and refinishes that are clearly not done by a professional or a contractor. The previous owner may have been removing a stained area such as where animals urinate or a damaged section was replaced and not done correctly.
Hardwood is easier to spot errors and this can be a red flag that the current or previous owner handled their own repairs and did not know what they were doing. Look for flooring where the trim is misaligned or incomplete. Also look for flooring that is too close to the door jamb
In this case, another area to be mindful of is the plumbing and electrical as these are not visually easy to spot but the same MO would apply.
KITCHEN
The kitchen is at the top of the list for house sell-ability. When appliances are missing or positioned poorly or just unbelievably cheep looking, this is a cost that will need to be consumed by the flipper. Replacing appliances is not new and is expected to flip a house but be careful of the cost.
Additionally the layout of the kitchen should be considered. Consider whether it can be improved within the budget. Countertops can be poorly installed and need to be replaced or doors improperly installed on existing cabinets where they do not close correctly. Will need fixing, replacing and probably replacing.
Be mindful that they may have moved to try to improve the layout or look and therefore plumbing or gas locations may have also been changed. These things combined can get costly to fix.
ELECTRICAL ISSUES
Another area to watch for issues is electrical. The older house used to have screw in fuses and were eventually replaced with circuit breakers which became standard. Unfortunately the cost to replace an electrical box is high so the savvy home owner may have done this themselves. People try do their own wiring but they don’t understand the codes required.
You might end up finding too many outlets on a single circuit or too many lights wired to the same circuit breaker. This might require an electrician to review and a heavy estimate to bring the house up to code.
DOORS FAIL
Another common issue can identify a poorly manage house is the doors. Over time the house settles and in many cases doorways will shift and cause issues but then the owner may attempt to fix the issue. Watch for doors that do not close properly and need to be forced open and closed. Normally the doors should close smoothly and latch properly.
PERMITS & INSPECTIONS
It is a good idea to review permits and check on any documented work the local government has on file. Sometimes there are fees owed by the property that the owner is not disclosing. It is usually a pain the deal with the government process but this could save time and money before attempting to fix and flip the house.
Another options is to have an inspection done to reveal any defects that can’t be fixed. Some of these would include inspecting the roof, drainage and pest or termite presence.
RESPONSE QUESTIONS
What to look for in a flip house
Look for a house that requires more cosmetic changes than structure and damage repair. Minor drywall damage, easy to paint and curb appeal is easy to upgrade.
What is the meaning of Flipping Houses?
Flipping a House is where you purchase a distressed property, fix it and sell it for a profit in a short period such as months to a few years.