How To Walk Through an Investment Property Like a Pro

Hey, everybody! I’m Tarl Yarber, and I want to show you around a property we’re purchasing. Along the way, I’ll point out what you should be paying attention to when walking through a property as an investor.

Check out the video below for the full tour, and read on for my advice.

Recently, I went to check out a potential investment property. We don’t own this one yet. I had actually never been to this house before. So, in the video above, you guys are going to walk with me for the first time that I’ve ever been through it. So exciting!

I’m going to show you guys how I walk through each house, how I look at it in detail, how I take photos of everything, and whether or not it’s a good house to buy or not for us.

We were supposed to close on the property in the video in a matter of a couple of days. So the fact that we’ve been able to go through this house from start to finish and commit to buying it without me ever seeing it is pretty cool. I’m going to show you how we actually do that. Let’s walk the property.

Before You Start

Now, before we walk any property, even though I’ve never been here before, other than today, we’ve got to know what we need to do to get our maximum after-repair value for the property before we buy it.

We had already committed to buying this house for $170,000. We also believe that we can get the house up to a value of $425,000. So with those things combined, what is our max budget that we can have before we actually break into this property and start doing all the remodeling?

We need a plan. We need to know what kind of bedroom/bathroom count we need, how much full rehab we need to do. And in all that, can we make our budget work?

At a $425,000 ARV and a $170,000 purchase, if we want to hit the numbers we want for profitability, that gives us a budget of between $125,000 and $135,000, which is a lot of budget.

However, this house is completely messed up. It’s down to the studs. The past owner tried to rehab it a bunch of times. They weren’t able to really do it.

There’s a lot of siding issues. We have to do literally everything. It’s currently a three-bedroom with no baths. And we need to make it at least a three-bedroom with a master bath and another second bath as well. If we can get four bedrooms, that would be even better.

Let’s see if we can make this happen.

We already committed to buying this house. The reason why we already committed to buying it is that my team’s already been through it. They took lots and lots of photos of this thing. They put it in full detail.

This is why I think photos are the most important part of our entire business for us to analyze properties. We have over 175 photos of this house already from my team members. And I was able from my computer to analyze this deal without ever walking in it and get the full concept of it because of how we take photos.

If I were here by myself for the first time, I would treat this like I’ve never been here before. I would take photos of the entire front. I would go around the entire side, out the entire exterior, get all the details I can, see if I can see the roof, the crawl space, everything. And then I would go through the front door and continue to take photos as if I’m walking through it.

Some of you guys might say, let’s think about a video. Well, with photos, you can zoom in and see the rehab and construction issues. You can send them to people. You can do all sorts of stuff. A video’s also cool, but I would rather have photos than a video.

The Exterior

Initially, when I’m looking at this house, I can see that there’s something called cement asbestos board. Now, do you always need to take that off? No. But on this house, if you want to get the value we’re looking for, we might need to take that off, which means an asbestos abatement.

I do know what the rest of the house looks like on the sides. And you’ll see that the siding is not in good condition. And unfortunately, we’re going to have to remove all of that.

I’m also noticing the windows and how they’re older, single-pane windows. There are some issues with the trim pieces on the side of the house, too. And it is a little dated, but we like the character because it’s an old Craftsman home. We’re going to want to probably try to keep this character as much as possible for the front porch.

We are going to need to do a lot of repairs with it to begin with. Already I’m looking at almost a full rehab just on the exterior of the house.

There’s also major landscaping. The space on the side almost looks like an extra lot, which we might dig into later in the future if we keep this thing.

All the cement asbestos boards are being ripped off throughout the whole property. All the windows are messed up already. I’m going to need to check the foundation out. They’ve done some work, you can tell, with some of the vents that are down there. This is all bad.

So I’m looking at full windows. I’m looking at a full siding replacement. I’m looking at all of it. But those are all big expenses.

If you’ve ever had to have asbestos ripped off on a property, it’s not cheap. I’m not going to go down a path of how silly some of the asbestos abatement companies are and the laws around it. But the truth is, you’ve got to do it right. Or else you get in trouble, because there’s a lot of issues with it in our area.

There’s a garage here. I know we’ve only peeked in there. There’s a bunch of garbage in there. So I’m going to need a trash-out bid for sure. The siding’s all messed up. I’m going to have to redo that. The roof’s messed up.

We’re not going to be able to save any of this, so we’re going to have to rip all that out, and that’s going to be exciting. So we know full siding, full windows, full cement asbestos board mitigation, major landscaping. We’re already cutting into our budget pretty fast here.

Some of you guys might be from different parts of the U.S. and go, why not just tear down the whole house? Why not? Some people would.

Unfortunately, in the Pacific Northwest, where we are, the cost to rebuild this type of house would actually be way more than $125,000 or $135,000. Way more. There’s no way we’re going to be able to do that.

Plus it creates an increase in permit times, all that sort of stuff. The value of the house wouldn’t be that much more than $425,000, even if it was a new build, especially if we take it to fully redoing it. Plus, it’s an old historic-looking house from 1895. Why would I want to tear that down, especially when we can make it awesome?

The Interior

Before we go on the inside, this is the stuff that always cracks me up. What did people do to this property before they actually started remodeling it? Who did they listen to, what contractors did they hire? It’s always fascinated me to look at the construction components of what somebody else was doing before we got to it.

There are huge 4×6 treated posts. And they’re bracketed in nicely. They cut the cement, everything. They put a lot of work into getting this in here. And then you look at the top and what they’re trying to build.

They put these little 4x4s and 2x4s in. And they didn’t do any of this right up top. And they use these massive 4x6s, which is crazy to me. They decided they needed these to be really strong, but everything else up there holding the roof structure to be super, super weak.

Just a side note, make sure you hire the right contractors, the right professionals when you’re working with them. Not everybody knows what they’re doing.

We’ve already pretty much said we’re doing everything on the exterior, so that’s a lot of money already and those detailed costs for you are going to be different than for us.

Every part of the U.S. has a different expense. Every contractor is a different bid. Material costs are different everywhere in the U.S. as well. So you’re going to need to look that up yourself. There’s a great book called by J. Scott called The Book on Estimating Rehab Costs.

I’ve never been inside the house, but I’ve seen photos, remember, lots of photos, and I would be taking photos of everything.

My first instinct is that somebody did some work here cutting all these joists. When you start seeing a bunch of cut joists, you go, why did they cut all those joists? There’s something there, were they structural or not? Always consult a professional if you need to.

I’d be taking lots of photos of this area and sending them to an architect or a well-qualified engineer or well-qualified GC or contractor or framer. They can answer these questions and help you with the whole schematics of the house, maybe without even showing up to the house if you have the right photos and documentation.

So for us, we know that they were trying to open this area up to make the stairway bigger and they left this here to structurally support it. However, this is not structurally supportive. It’s an old, old, old opening that has no structural support whatsoever. And that is going to need to be remedied and fixed.

We’re going to probably need to put a big, huge beam right here in this whole area to hold this because it’s holding up the entire floor structure above us. One beam is holding up this entire bedroom that’s above us and this is not structural. So that’s bad. That’s a big red flag.

The rest of this house, it’s really hard to see with this video because it’s all open framing. So let’s go jump into the floor plan that we magically had somebody on our team draw up for you guys before we got here.

We went through the front door. There’s that non-structural beam that we’re going to need to replace, an open area, the joists are running this way. And then a little alcove area. There’s a back area here. This is another load beam. And then you have a weird bedroom and a closet with no doors. It’s kind of funny because there’s literally no doors on this thing, which is great.

When we’re looking here, we have a lot of open space. We have a living room concept. We have a big open area here. If you have no skill in building a floor plan, can you at least look at all this framing and open space and think, can I get at least a bedroom? Can I get a kitchen? Can I get a living room? Probably. Can we even get a bathroom down here? Probably.

If you get the help, maybe your realtor, maybe this is where an architect or a designer would come in and help you out quite a bit. They could probably look at all this and go, cool, maybe put a half-bath here, make this into some sort of closet and bedroom configuration, make a living room, dining room, and then maybe a kitchen in the back.

And there’s plenty of space here to get a bedroom, a bath, living room, kitchen, so forth. If you’re like me, when I first started doing this business, I would never be able to do that in a million years. But it’s actually been over a decade now and I can do it. So can you, depending on how many projects you have.

Working With the Pros

Before I ever started learning how to do this stuff on my own, I hired professionals. I worked with professionals, I copied other investors. I started working with them, too. And it taught us how to build floor plans over the years.

It takes time. But if you never want to do it, that’s why you hire people. That’s what they’re there for. And you’ve got to budget that in.

Immediately you’re looking at this and going, “man, you need everything.” Absolutely right. We do need everything.

We need to add sheetrock, insulation, we have framing issues we’ve got to take care of. We’ve got to change a few things. We’ve got to add a brand new kitchen. We’ve got to add a bath. We’ve got to add electrical, plumbing, all of it.

Let me give you a tip and trick. Most plumbers charge per fixture for a rough-in estimate. Let’s say I need two bathrooms; that’s two toilets, two sinks, two baths. There already are six fixtures right there.

If you already know what that per-fixture cost is, you go okay, you’ve got six fixtures there and you could continue to count the fixtures. It doesn’t matter what’s going on in the rest of the house. You might be able to come up with your own plumbing bid depending on who you work with, just ask them what their rough-in cost is for price per fixture.

Same with electricians. They might do it price per square footage. If they look at this entire house, there’s no electrical in this house. So we’re going to have to redo 100% of the wiring.

So if we send a plan to an electrician that’s used to doing builds and we say, hey, you don’t even need to walk the house—most electricians wouldn’t need to if they look at the plans that you provide them—and say we just need a bid for fully electrocuting this entire house, basically rewiring the whole thing because there’s no wiring on it.

They like that it’s all open framing, which is better for them because they don’t need to cut sheetrock or anything like that. And they could just come in and just bang it out.

You’ll probably be able to get bids without electricians even having to walk the house, especially if you send them some photos and you show them plans. They’ll give bids that way. You can send it out to 20 different electricians and get bids back pretty quickly.

There are lots of cool things when you have a fully demoed-out open framing house that can save you time and actually can save you costs depending on what you’re doing.

The good news for us, we didn’t have to pay to get all the demo out of here and get all the lath and plaster out of here. That’s a lot of money to do. You don’t want to do that.

As for the upstairs, one of our challenges that I saw from the photos was the stairway. Is it structurally sound?

It is. We went through it, so we double-checked that. But I wasn’t sure what the loads were up at the top. And our engineer or architect that we’re working with would be able to help confirm that.

Making Assessments

But I want to show you guys some tricks to see what’s load and what’s not on a house. Don’t quote me on all this stuff because you’ve got to hire a professional. This just comes with some time.

Once again, same concept here. Big open floor plan, you can walk through everything. It’s all cut out and we have to do everything, literally everything. Now there’s some electrical hanging around here.

This is one of the issues when you buy houses that have been partially done, we don’t know if that’s done right. We don’t know if we have to redo all of this. If we have to change the floor plan around, none of that counts. So we have to rip it out anyway.

We’re budgeting in all electrical, everything, like doesn’t even exist. All plumbing, all sheetrock, all framing, everything, budget it all. You’re going to do it anyway. Budget it in. And so it is pretty much like building a new house at this point. We’re just working with an existing footprint.

Let me show you one of the tricks for loads. There are ceiling joists, just like floor joists, that typically carry some sort of load. A roof structure is different than a flooring structure and how that works, but something to check is which way the joists run. They have to rest on something.

So these joists run this way, they can only go so far before they have to rest on a wall of some sort or a beam. Well, these joists run all the way to here and then they stop on this beam, which is actually two 2x4s and then one 4×4, which makes it technically an 8×4 at that point.

So it’s resting here. If they’re resting on here, this means this is a load, because if you rip this out, the whole thing falls down. That’s essentially what that means. So if you know where the joists are running on a property, you can start to look at which walls are actually carrying loads more than other walls and which ones are floating walls.

This wall here doesn’t carry any major load, but it’s basically helping hold the full span of the ceiling joists. But if we move this over a couple of inches left, right, that kind of stuff, it wouldn’t be a big deal. It’s still there to help support, but it doesn’t matter where it is exactly. There’s more to it than that. But those are some things to kind of check out.

You can see that underneath in the basements of houses, you can see how the floor joists are running. And you can see if they’re resting on stuff. Weight has to rest on something.

Let’s go back to the floor plan. Full open concept going on here. You can see through everything. It is a really funky floor plan and we still don’t understand what was in somebody’s head to want to make it this way.

But that’s one of the joys of this business. We can either keep it as-is and budget it the way that they framed it, because they put a lot of work into this to frame it, or we just say, screw it, let’s make it our own floor plan, which means we have to increase our budget.

It’s a catch-22, unfortunately. We might get more value for doing it the way we want to because it’s a more functional floor plan, but then it’s going to cost us more because we’ve got to change it. Then again, we might be able to keep it the way it is, which costs us less, which might not get us the value that we want. It might be a wash. We don’t know. So we have to dig into that a little bit more.

Planning a Layout

We make our plans on a program called Home Designer Pro, and that gives us these basic concepts.

So these are the stairs that we walked up. And I was saying that this wall here is basically a load. And then I found that this one is too, because if you look up, these joists are running this way over here and they rest on this, but then they stop and the joists switch this way. But there are joists resting on this wall. And that’s this wall right here.

There’s a bedroom here. That’s a good bedroom, we’ll probably keep that, that’s functional. We don’t like the walls go this way, so we’re talking about putting a new wall here and then putting a fatty beam over here instead to be able to carry this load. That way we can have this as a smaller bedroom and have more of a hallway. You have this weird closet. So basically you have a closet here and a huge closet here.

They intended on making that a master bath. But then they were going to put a doorway here and make this all one big, huge master suite. So they were going to do a master suite down here and the master suite up here as well and have this really weird opening here. So you had a closet, closet, bedroom, and then bathroom, and then you also had a closet and then another bathroom potentially.

We don’t need two master suites. Currently, these would be the two only bathrooms in the entire house and no bathroom downstairs. So we think we could probably get three bedrooms up here, a bedroom downstairs, make a master bathroom here, and probably squeeze in another bathroom in another spot.

This is what we came up with as a potential floor plan. That wall I said we just tuck over and make a bedroom, this is a load area here so that we still keep this load, we actually increase it. We could put the beam here and then we have a smaller bedroom. The hallway gets shifted, we get a hall bath, and then we have a doorway that goes into a master suite and a master closet, master bedroom.

It works out so that we can do it. It magically works. Now, your architect could do that. Like I said, you’d have to pay for that. Right now we’re messing around and these are just ideas. This might not be the final plan that we actually make.

If we decide to get permits for this house, which you bet that we definitely will, because this is a major remodel. You have to get permits. This is going to get a little bit more refined.

There’s going to be more details put into this because they’re required for the permitting to be done, in which case we might need an architect to put those details in. Depends on your city, depends on your municipality.

Making It Work

All that said, can we make this deal work? That’s the question. And there’s a lot here. This is a hard thing to look at and say this is a completely open concept house.

But this is one of the downsides when people get into house flipping. We actually might keep this as a rental we haven’t decided yet. As you look at a house like this, you think, “oh, I could just remodel this whole thing.”

But somebody on your team has to have some sort of construction experience. Don’t let this be your very first project you ever do as a house flip or a BRRRR. Don’t let it be your first one unless you have competent people on your team that understand the construction.

I do truly believe we can get this done for less than $135,000 based on the years of experience we’ve had. But if I was newer on this project, and this has happened to me in past projects, that $135,000 can go to $200,000 really fast in the Pacific Northwest with change orders, issues, whatever.

You start listening to the wrong contractors, doing more than you need to, being charged more than you need to be charged. This type of project can get out of hand like that pretty quickly.

It’s super important that on a house like this, you know your numbers and don’t just jump straight into it. Definitely get somebody on your team, maybe partner with another investor that you can work with on a project like this, that might be able to help you in your business, that has the experience on these type of houses. I would do that in a heartbeat with some investors, especially if it was an area that I don’t invest in.

I’d rather get 50% of something versus 100% of nothing or get 100% of a project that totally goes completely sideways because it goes way over budget because there’s too many factors involved in it. I hope that doesn’t scare some of you guys away from investing.

We’re going to do more videos on this house as time goes on, so definitely continue to check out what we do. We hope it helps you guys for your next project or even helps you get started in real estate investing.

Don’t be scared of this house. Just make sure that you do the right house for you if you guys are starting out.

What do you look for when doing a property walk-through?

Let us know in the comments.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.