Getting stuck with a money pit that won't sell is a home flipper's worst nightmare. When it comes to lessons about fix and flips you usually learn the hard way, it all starts with emotions. So many new real estate investors feel so excited about getting the keys or key code to their new investment property that they miss all the warning signs that spell trouble ahead. According to an article by thezebra.com, it's important to put facts and figures ahead of "gut instinct." In other words, if the inspector states problems with mildew but you have a good "feeling" about the home's potential, go with the facts. To make the most profit or see a greater ROI (return on investment), keep an eye out for potential disasters.
A flood zone
While some people don't mind living in a flood zone in terms of their personal safety, they fail to consider homeowner's insurance costs. Before committing to a home in a flood zone or other area deemed risky, consider the financial consequences. With a home flip, you will not need to pay the carrying costs for very long. But if a massive rain storm hits, it could potentially cost you time which translates into money.
Foundation problems
An inspector will reveal whether the investment home you love has foundation problems. Most insurance companies do not cover foundation problems, which are some of the most expensive repairs. Some warning signs include cracks in walls or ceilings, sloping floors and doors that don't fit their frame. Other expensive issues include plumbing and electrical issues. Warning signs include leaks, low water pressure, knocking sounds and discolored water.
An old roof
Find out whether the current owner replaced the roof in recent years. Even if you don't want to replace the roof, you will likely pay higher homeowner’s insurance costs if it's a roof that's more than 15 years old. Many buyers notice a shoddy roof. It's difficult to achieve good curb appeal with and older, stained roof. Some telltale signs of a bad roof include missing shingles, evidence of leaks and stains on the roof.
An undesirable neighborhood
Even if you fix up a home so it's the nicest, most modern home on the block, it will languish on the market in an undesirable neighborhood. Before buying an investment, talk to neighbors. Check to see the market rent and vacancy rates in case you want to flip to a landlord. If homes don't sell in your targeted price range, find another area.
Instead of falling in love with a home based on your decorating vision, dig below the surface. Trust the home inspection over your intuition because home buying is a notoriously emotional experience even for investors. At Trust Deed Capital, we want borrowers to avoid making costly mistakes on every fix and flip. For more tips on what to look for in a potential home flip, please contact us.
