When it comes to finding a property to flip, its best to buy low right? Well not exactly because there are certain properties you should never buy. Find out some details to look out for in a potential flips before taking out a Arizona Fix and Flip loan on them, so you can avoid disaster.
They say the first rule of investment is “buy low and sell high,” but when it comes to the flipping business you want to buy low, fix up and sell a property in the shortest amount of time possible.
With certain types of properties that’s just not possible, properties such as:
First you should never buy blind, please take even the briefest of tours of any potential flip so you can look for:
• Foundation issues: If walking through a home makes you dizzy due to a dramatic slant in the floor, it’s pretty obvious you shouldn’t buy it. You should also never buy a house that looks like it was built on top of a fault line. But there are some less obvious signs you need to look for to spot foundation issues. You need to look for cracks in the wall but not just any cracks-horizontal cracks. If a crack runs horizontally it means the foundation is under considerable stress.
• Roof issues: When walking through a potential flip you need to look at the ceiling, looking for cracks, sags and dark spots which could indicate water damage. Even if there’s no outwardly apparent signs of water damage you’ll need to pop your head into the attic. Look for light, because where there is light there is rain and where there is rain there is water damage, and where there is water damage, there’s the need to replace the roof.
• Older homes with less obvious expenses: You should aim to do your walkthrough with your contractor, who’ll likely be able to spot less obvious expenses. For example, your contractor might notice that the age of electrical meter indicates a need to rip the walls apart to replace the wiring. If you don’t have a contractor, you could simply account for the age of the home, older homes are likely to have far more issues.
Any one of these issues, foundation, roof or electrical will amount to an expenses, which could cost you tens of thousands of dollars. Not to mention the weeks and weeks it will take to resolve anyone of these problems, weeks and weeks in which you will need to continue making loan payments.
The golden rule when it comes to rehab is to spend money on things that buyers will see. Will buyers see that neatly poured foundation, that new roof, that new wiring system? Not really, so any money you spend doing these fixes is basically wasted.
If your too lazy to take a simple tour of the house do me a favor, why don’t you go into your backyard, get ten thousand dollars and set it on fire, because that’s what will be the end result if you don’t perform even this basic level of due diligence.
When combing the online listings don’t get baited in by a low sales price, buying low isn’t always right, you need to buy right, rehab smart and sell quickly. Properties with any of the above issues simple don’t meet these criteria.
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.