Flipping properties is an exciting way to buy a home for less and make good money from its sale. Remodeling often involves a lot of creativity when it comes to fixing unstable foundations, poor crafting, and more. The challenge of a fix-and-flip investment is ultimately rewarding, especially when your property sells well.
There are a few things to watch out for concerning which houses to buy. Real estate investors should refrain from choosing a home until they have a full picture of its components. Many places hold hidden surprises that can make remodeling difficult.
Here are five things to look for when shopping for your next fixer-upper.
1. Leaks and Moisture
Moisture breeds mold, which is the bane of every homeowner and real estate investor. It can be costly to remove, and there’s a chance of it returning if the initial work wasn’t comprehensive. Any fungus elimination should include fixing the water source.
Unsightly stains can remain even after professionals remove the mold, which real estate investors should consider before tackling a project. These cosmetic flaws can deter potential homeowners.
Check for water stains on the ceiling, walls, and floors — including the basement and attic. These marks are indicators of pipe leakage, which facilitates mold growth.
2. Bad History
All homeowners won’t be willing to participate in a fix-and-flip investment. Many vacant houses result from foreclosures, which means unhappy owners. They may destroy the property out of spite, making it hard for anyone to do subsequent repairs. Others may take items with them when they leave, such as light fixtures or faucets.
Alternately, these properties may suffer destruction because of a lack of maintenance. People who lose their homes don’t have the money to keep up with repairs. A long history of neglect could spell a house that’s a lot of trouble to rehabilitate. Keep in mind what you may encounter with foreclosed homes. It can be very different from purchasing straight from the owner.
Many investors look for fix-and-flips at real estate auctions, which are fast-paced processes that require a little risk — but a good investment reaps plenty of rewards. If you’re buying a home from an auction, however, you won’t be able to look inside and see any potential issues.
This factor can be a problem if there are pests in the house, which you won’t know until repairs are underway. These unwanted visitors camp out in places like attics and basements that don’t see much activity. Look around for signs of animal or insect waste, and listen for the telltale noises of squeaking or chewing.
If you decide to take on the fixer-upper anyway, cover up any holes and cracks where pests can get in. Solving the infestation won’t last long if you mistakenly leave gateways for animals to re-enter.
4. Unfavorable Locations
Investing in a fix-and-flip in a poor location will decrease your earnings before you make any. Few homeowners will want to inhabit a home that won’t grow in value. Likewise, you’re unlikely to see many rewards from putting your energy toward an undesirable place.
It’s crucial to find a good location for your house flip. Research the area’s employment rates, schools, and recreational opportunities. Lots of activity and growth promises abundant returns. If a town seems like it’s at a stand-still, you won’t get many homebuyers coming in to look for a new abode. Contact local agencies and visit the city in person to get a full understanding of its landscape.
Try to choose a place nearby instead of hours away. You’ll be visiting the site often and traveling long distances can pile on the stress. With various projects and tasks to complete, the last thing a real estate investor needs is added tension.
5. Improvements with No Permits
Though homeowners often perform improvements with good intentions, their methods aren’t always appropriate or even legal. Buying a place with unapproved renovations can get you in legal trouble. Some additions may not be structurally safe or up to code, which you will have to remedy.
You may discover the house is bigger than what the listing says because owners can’t include unpermitted square footage in the specs. Home insurance doesn’t cover this kind of work, which can be a major disadvantage if a fire or flood happens. Often, it’s better to pass on a place that features renovations without permits.
Red Flags for Fix-and-Flip Investors
Recognizing these red flags will assist you in separating the duds from the winners. Turn your fix-and-flip investment into a successful project by heeding the warning signs of an unfavorable property. You’ll make better choices and spend less money on expensive repairs.
This article has been contributed by Holly Welles.