Is a home with a cracked foundation worth the investment? And how much would it cost to fix that kind of problem?

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Jay Hinrichs · Answer

@Shawn Thom

Shawn  my guys that I fund in the south deal with this on Many of the homes. and those that live out of the area can really be in for a shock when they see there home has had settlement of varying degrees.. Doors that won't close.. AS you state plumbing in the slab breaks  cabinets all crooked cracks in sheet rock... Its a major issue.

So I am usually funding 2 to 3  month that are going through major foundation repairs IE 15 to 30k ... so when someone buys a home and has it as a buy and hold then one day its foundation goes.. there goes 10 years of positive cash flow or more down the drain as it were. Perimeter foundations are not so bad you just jack them around but slabs can be bad.  Its amazing really you can see a house that is just cracked in half.. Like I said Humpty dumpty houses is what I call them.  And great opportunities for the flipper.. And a real bummer for the owner.

Shawn Thom · Answer

You haven't said if this is a flip or a hold.  either way, I don't see it as a major issue.  I don't think there is a stigma of foundation work on older houses.  If you are looking at a newer house (less than 7-10 years old) and its having issues I may take pause for a flip.  If I'm looking at an older house (1955-1985) and they tell me there hasn't been any foundation work, I'd be suspicious.  Its almost a given that houses in texas will eventually have foundation works...sometimes several times.

Get a price for the repair, then assume there may be some underslab foundation issues and budget for that.  Most say if there is a 3" drop on foundation, you'll have a break in plumbing when u repair foundation.

Bill Gulley · Answer

How much does it cost to fix a roof?

You need to get a bid, it may not even need repairs, you might be able to point tuck the crack yourself, maybe paint will fill the crack well enough for appearance sake.

Shawn Thom · Answer

I'd be curious on the details of a $30k foundation repair.  I've never even heard of one that expensive.

Jay Hinrichs · Answer

@Sebastian Caycedo

I hear ya... But the issue is TK operators do not put foundation issues into their proformas and an out of state investor who finds themselves with a foundation issue will most likely not get the same price benefit you as a very experienced local get.

And some homes will be 10 to 30k to fix I know I have paid for many through rehab draws and these are my guys that have 10 plus years at buy and flip so I know they are getting local prices... so if every 5 years or so you need another 2 to 4k to keep your home level well with price run up you have currently going on in Texas  you  just spent your positive cash flow you were counting on for 20 to 40 months...

And I am sure a local is not paying the same price as someone buying turn key so they can easily afford to put corrective foundation issues into their long term budgets and do just fine.

That's the point I was trying to make...

Sebastian Caycedo · Answer

@Jay Hinrichs I'll have to disagree in costing soo much for just one property. It makes absolute sense if we're talking about a few rental homes, and they all start developing foundation issues at the same time. Besides that with basically every home built prior to 1980 will have some foundation issues because of the clay soil here in Texas, it's a given to allocate for problems.

Either way, with the low cost of piers here ($175 for interior and $185 for exterior) average of what we're spending on each home (avg. 1,600sq ft) is around $2,500.

On the buying end, the more foundation cracks/problems, the cheaper we can usually get it. All in all seeing it on practically every single property we come across with, every experienced investor here is used to it.

Jay Hinrichs · Answer

@Shawn Thom

Foundation issue homes are some of the best opportunities..

And based on your knowledge and experience in Texas that virtually every home will deal with it over time... That makes buy and hold in Texas that much more risky because one day you could be fine the next you have a cracked foundation and its 25k to put humpty dumpty back together..

So when people are Flocking to Texas right now ( herd mentality) and not putting future foundation issues into their long term cash flow performa's I think your correct that is wishful thinking at best.

Simon Campbell · Answer

@John Chapman You are correct to say that most foundation issues can be fixed if you throw enough money at it. But, if the buyer is looking at homes for investment purposes, the amount of money put into fixing a foundation issue could destroy the investor's return and any potential for profit on the project. The main reason is that buyers know there is a cost to repairing the foundation but they are unwilling to pay you back for the full amount.

John Chapman · Answer

Miguel, you live in Texas.  If you cannot figure out how to buy houses with foundation issues (of which there are many), then you will be cutting yourself out of the majority of the distressed market.   Very few foundation issues cannot be fixed (I've only seen a handful); for the rest, it is simply a matter of money.

Simon Campbell · Answer

Much depends on what caused the crack. If you have a tree root problem than fixing the crack is not going to fix the problem. If the crack was caused by settling then there is a bigger issue here. Figure out what caused the crack and get firm estimates from professionals and then you will know what to do.

Is a home with a cracked foundation worth the investment? And how much would it cost to fix that kind of problem?

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