What to look for when searching for properties to flip?

Question

I will start driving around an hour after work a few times a week looking for "ugly" houses in my town. I'm not really sure what I'm looking for, or what neighborhoods I should be looking in. The first time I drove around was in a very low-income neighborhood where the homes were built between 1930-1950, and houses that didn't need fixed would probably sell for $80-$100,000. I found one property that was vacant and had boarded up windows, so I went home, researched, found the owner of the property and gave him a call. Turns out he had the renters evicted and didn't have new renters yet, but the house looked pretty awful. He wasn't interested in selling the property because nobody "gave him a good enough offer". He said all offers have been for less than what the property was even worth. From a quick glance, it looked like the roof needed replacing, new paint, new windows, and who knows what else as I just did a drive-by. I think before calling more people, I need to be able to have an idea of what may need to be done to the property, and if there's potential? However, it was a big step to find a property on my own and actually get out of my comfort zone and call the owner!

What I really need help with is figuring out what to look for. Here are a few questions:

- What age range of houses are best for flipping?

- What neighborhoods? Low-income? Middle income? (The median house price is around $170,000 in my town)

- What things am I looking for on the outside? What is good for my first flip project?

- Anything I want to stay away from?

My plan is to drive around for a few hours during the week, then call people and work the numbers on the weekends to see if I can come up with some proposals. I also have an absentee owners list from a title company to start calling off of as well.

Any help would be appreciated!

Dawn Anastasi · Answer

Definitely older houses have their own issues ... renovating one right now that was from 1926. Oldest house on the block. Had the foundation checked out and it was solid. Had to upgrade the electrical from 60 amp to 100 amp service. New roof. Overall not a bad property, just needed some TLC.

James Vermillion · Answer

Alyssa, first off congratulations. While you have only taken small steps so far, you have moved beyond where many to-be investors go, you have taken action. I agree with Brandon that driving for properties is not my favorite method to find investment properties, but driving neighborhoods in your market can be an excellent way to familiarize yourself with the market conditions. I will take a stab at your questions: 1) I have flipped houses ranging from 1939 to just a few years old and cannot say one age range is better than the others, however, they are DIFFERENT. In older homes you have more safety concerns (lead paint, asbestos) to think about and more systems (plumbing/electrical) that might need completely updated. 2) Again, there is not necessarily a best answer on which neighborhoods, but there is a best range for every investor. What I mean by that is you need to choose your investment criteria based on what you can financially target (how much capital you have, your borrowing power, etc). In addition, your experience and comfort level should be a factor in your choosing a price point. I suggest new investors focus on the properties in price points where buyers are abundant, so these are generally working class neighborhoods with 3/2 houses. 3) In many cases you are not able to tell much from the outside but you mentioned a couple of the big ones. Off the top of my head we look at the roof condition, windows, exterior condition (rotting wood, broken siding, cracks in brick, etc), gutters and downspouts, yard and landscaping, general curb appeal / potential, grading, light fixtures, trim, doors, driveways, sidewalks, etc. 4) We have flipped houses with foundation issues, mold damage, electric overhauls, etc, so it is not what you need to avoid per say, but being able to put a price-tag on issues and accurately estimate rehab costs and value after the repairs are completed. However, I do avoid non-conforming properties (those which standout in the neighborhood for reasons such as size, age, use, etc) because they can be much more difficult to analyze and harder to sell.

Jennifer Lee · Answer

I think your questions are right on. Only you can answer them...what are you comfortable with. It took me a year to narrow down my farm area. I just moved here and its very different each township, neighborhood etc. Too many opinions about school.: For me: price was #1 Can I afford the area? I do cash deals...my own cash...so my budget is fixed. Ex. 150k renov 30k arv 200-250k....I currently don't have license... so it eats at my bottom line. Or 200k renov 30k arc 300-400k....but I got no $$$ right now. Location location location: If I learn anything....I buy property that is easy to sell. School, plot, convenience etc Anything with building is fixable... but you can't move the house. Once you narrow down your farm area... focus there Drive around, look virtually, call around. Know your ######## And when you see a deal that makes sense you will know. Bc u followed the area. Recently sold, on market prices...etc I hope that helps

Brandon Turner · Answer

Hello Alyssa Craft Great questions. I'm not always the biggest fan of driving around looking for houses, because it takes so much time, but it all depends on your market. If homes on the MLS or through wholesalers aren't possible, then it's not a bad way to get into the game. You'll just see that it takes a lot of work - which isn't bad. So, in my opinion - the age of the house doesn't matter too much - to me anyways. However, the older home, the more expensive usually. Older homes often have bad wiring, plumbing, etc - but that may have been updated. For just starting out, I would probably shoot for the newest possible, probably newer than 1980 (you can also avoid the federal lead paint laws that way also) Neighborhoods - This is really subjective, but I'd stay away from the worst and the best. Talk with some real estate agents and see what the different neighborhoods are like. What are the average number of days a property sits on the market before selling, how many homes are sold, etc. Hope that helps some! Be sure to check out some of the really awesome articles on the BiggerPockets Blog lately about flipping. There has been some really great stuff that should help a lot! Thoughts?