Walking through a property to assess its flip potential can be overwhelming. There’s so much to look at, perhaps you also need to step over the trash and mouldy furniture, and you know that there could be hidden problems that you simply can’t see.
In a future article I’ll give you a few more specifics about exactly what you should be looking for as you move from room to room, in this blog post I want to give you some higher level things to be looking for from the perspective of an investor:
1. Watch For Things That Your Target Buyer Will Be Attracted To
Remember, you’re buying this house to make money off it by fixing and selling it, so determine what your buyer wants to see in the house. If they’re retail buyers, are they a young family that will be attracted by three bedrooms and a big backyard? If they’re investors, is this a property that could be maintenance free and easy to rent? Think about what your buyer wants and make those things your top wish list as you walk through the house.
2. Watch For Affordable Opportunities To Rapidly Increase The Value Of The Property
As a rehabber, you want to fix a property as quickly and affordably as possible and sell it for the highest dollar value you can get. Therefore, your eyes should be peeled for these affordable repairs that can rapidly drive up the selling price. Think: paint, new carpet, and a modest investment into the kitchen and bathroom. Conversely, damaged foundations and rotting roofs might cost a lot to fix but not increase the value of the house as much. You want to improve the house so you can sell it at a higher amount but you want to do so quickly and affordably.
3. Watch For Things That Could Detract Your Target Buyer From Buying The Property
Look around your potential property through the eyes of the person you’ll be selling the property to. What qualities are they evaluating the house on before they buy it? If they have young children, for example, an in-ground pool in the backyard might seem dangerous to them. If they’re elderly, a lot of stairs might not be an attractive quality in a home. Identify these things and decide whether they can be mitigated, ignored, or whether you need to pass on the property.
4. Watch For What YOU Like About The Property
This fourth point surprises most people but I advise that you watch for things you like as you walk through the house. Here’s why: Many investors, especially brand new investors, tend to get emotionally attached to a property. If you spot a lot of things that you really like about the property then this should alert you that you are becoming too attached. Or if you notice a particular feature that you absolutely love, you should use this as warning to yourself that if you’re not careful, you could end up spending more money than necessary on this one beloved aspect of the property while ignoring other aspects of the property that are more important to your end buyer.
As you walk through a potential flip, you’ll want to watch for specific things like water damage, potential infestations, drainage issues, electrical issues, and more. But before you look for any of those specific things, first start with these four points. Just keeping these in mind as you walk through the property could make a huge difference in the return on your investment.