What types of properties do you WALK away from and why?

Question

I posted the other day about creating a more defined criteria for my flipping purchases.  I'm moving my business to a more metro area early next year and am trying to define my criteria better.  Where I am now is rural and we have adopted kind of a "take what you can get" attitude.

So with that, what types of properties, issues, characteristics, location, etc are big RED FLAGS for you.  What experiences have you had that have turned you off?

Someone in another post mentioned having that 6th sense for properties and when to walk aways.  I feel like that is definitely growing, but I still have a lot to learn.

Also, some things might not be a guaranteed "NO" but maybe a combination of them would be.

Here is a list of the top of my head:

Unknown Pool issues.  This has been very hit or miss with us.  When you get to a vacant house with a Green pool its hard to say what lies beneath.  We have had simple drain and clean to complete overhauls/Fill ins.  In fact we just filled one in and depending on the county can be a major pain!  Not a deal breaker, but can make estimating difficult.

Really bad neighbors (hoarders, dogs, insane people):  One of the first things I look for.  Will scare away prospective buyers and almost always cause a headache during the rehab.  Unless it is a lower end neighborhood and it the norm.

Bad floor plans or bad additions  :  If it can be fixed in budget, OK.  But if it is a lost cause and can never really look "Right" I walk away.  You see a lot where I am with Owner/builder homes.

Major foundation/Structural damage: I just don't have a good eye for what it takes to fix these issues.  Maybe with more experience.  My Boss (DAD) has done major jobs before which have turned out well, but not where I'm at right now.

Flat Tar and Gravel Roofs:  Hard to find roofers who still do it and difficult to sell these properties.

Recent Death in the Property:  This was a minor issue we suspect in a job that just got in escrow after a bit of a wait.  The previous owner died of natural causes in the house.  We disclosed.  Guessing it turned some people away.  I would have a hard time doing a house that had a murder or suicide in it.  Thoughts??

Well I'm excited to hear your thoughts on what I put down and your personal WALK AWAY criteria.

Thanks,

Scott Rist

Jeff Rabinowitz · Answer

Foundation issues were on my list also until I met a fellow investor who had been building and repairing foundations for 40 years or so. I partnered with him on his first rehab. (The basement wall was so bowed in I was nervous walking downstairs for fear that it would fall in on me.) I am still a bit leery of these types of issues but now have a consultant I can call on to give me a reliable estimate of how much it will cost to fix these problems.

I just flipped my first hoarder house. That would have scared me several years ago. Now that smells like money. I have also partnered on a severely fire damaged home. The best thing about houses that are perceived as problems by almost everyone is that there is very little competition for them. You can buy them well below value and if you can fix the problem you stand to profit handsomely.

The more you learn, the shorter your walk away from list will be.

Julia Blythe · Answer

We walk away from houses on busy roads.  It just takes too long to find a buyer willing to live on a busy street.

Jarred Sleeth · Answer

I've walked away from properties located directly next to schools.  Being near a school is great, but almost right on the property not so much.

I've also done the same with fire departments, trains, graveyards, and major highways.  No one wants to live somewhere with lots of noise pollution!  I skipped the graveyard just for curb appeal, they don't make too much noise ;)

JD Martin · Answer

These two are generally top of my list as well, and I would probably add fire damage and heavy asbestos materials within to that list, because they can be crazy expensive to repair. Outside of that, if I'm already in the property - meaning that I've already vetted the neighborhood, the opening price, etc - the main thing that will make me walk is catching the seller in a lie. If I determine the seller cannot be trusted to tell the truth in any fashion whatsoever, I would have absolutely no faith in disclosures and the like.

Example: had a contract on a house that appeared serviceable. Owners didn't have the utilities turned on for some reason, so I went through the process before the inspection. City refused to turn on the electric. When I asked the seller about it, they said they didn't know why the city wouldn't turn it on. I dug further and the city provided me a copy of an inspection report ordered by the sellers 10 days earlier that failed, and they told the sellers they would not turn on the electric without a new panel and a massive rewiring of the property. I walked from that property because the seller knew it wouldn't pass an electrical inspection, bargained with me with that knowledge, hoping that I wouldn't find out. When I did find out and told my agent I was walking, they came back and offered a few thousand more off. No dice, and I walked. It could have been a good property, but if they had been upfront with me about the electric I probably would have still bought it but would have priced my offer accordingly.

Epilogue: they finally found a buyer at $5k less than the desperation price they offered me. I probably would have gave them a couple grand more if we had bargained in good faith.

Sean Kremer · Answer

Scott.....

If it gets to the point that I'm going to meet with the sellers, that means that I've spent a good amount of time researching the property and If it gets to that point after all the qualifying I will always make an offer on the property. But I know going in, the ins and outs of the house and the mindset of the seller. I'm not positive on my acceptance rates, but if I had to guess probably about 3 % these days, that's just a guess though. I have ADHD so I find it hard to deal with specifics on anything. I just look at the big picture, put my head down and work, I figure I can review my stats when I'm retired.

I don't like to overthink deals too much.  My gut tells me if the deal is right. That may fly in the face of the thinker brains on here, but up to this point has done really well for me. I look at the numbers, look at the property , and if it works, I buy, if they don't, I try to negotiate more, but most of the time I just move along to the next one. Its easy to move along when you know you'll soon be looking at another property. The older and more experienced I get, the less patience I have for wasted time.

I have numerous realtors looking for properties that fit my criteria, along with wholesalers, I spend about 3 to 5 hours every night without fail on the internet looking at probably 15 different real estate sites to see what has come and gone from the market in my area. I pride myself on knowing about every deal that comes and goes within my farm market in my area before anyone else does. I believe in getting deals done before the rest of the world even knows they exist. But that takes a lot of time and hard work. I run ads, I have bandit signs, I watch the online deeds for notice of defaults in my area and send yellow letters out to each property that interests me.

One of the main things that works for me is my reputation around my area. I do what I say I will do and I do it quickly, people know that if I decide to buy their property that there will be little or no snags at all, I don't screw around with inspections or anything else that makes the seller think that I'm looking for a way out, and people seem to like my straightforward, honest, approach.  (Just look at Trump...).

What this gets me are phone calls from sellers that have heard about me and realize that I'm not their guy if they want retail, but I am their guy if they need fast cash and no hassles. There are a lot of sellers out there that are looking for more than getting top dollar out of a property........listen to their needs closely and do what you can for them to get the deal done.......Simple......As for the ones that want what you won't deliver......shake hands, leave a card for if or when they change their minds......and walk away. The longer you are in this business, the easier it gets in my opinion.  That being said, Nebraska and California are two entirely different places when it comes to real estate investing.  But the principles work the same in both areas. In my opinion the best recipe for success is to make this a lifestyle, you need to eat, sleep, breath real estate and never back off. Do what other won't.  Sure your wife may make fun of you for actively searching for properties while on the beach in the Cayman Islands, just remind her that's the reason your working from the beach in the first place.

Feel free to email me or whatever on here if you have questions Scott. I like to help if I can.  Sorry about the long post.  :)

Russell Brazil · Answer

I don't mess with a property if their is evidence of a foundation issue or mold.

Sean Kremer · Answer

I like properties on busy streets.....I put a for rent sign in the yard for any home in the city that I have for rent..(with the tenants permission)....every yard on a busy street also gets a  WE BUY HOMES sign in it too. Haven't had a tenant say no yet.  As far as obsolete layouts or foundation problems...etc., From the day that I started this business I told myself that every property I get in my truck to look at gets an offer made on it asap.

I can't think of any property anywhere that I would walk away from without an offer.  I haven't found a house yet in 25 years that I wouldn't buy if there were a way for me to make money.

In my opinion there is always a dollar figure that makes sense for every property. Making the seller see it that way is another matter.  You win some, you lose more. Ha ha.

Sean K

John Weidner · Answer

Low height basements.

People want finished basements in my farm.   Unless its a screaming deal that will allow $ to excavate I try to avoid.

Jeff Rabinowitz · Answer

Several of my rentals are on busy streets. I have bought them at discounts and have found they are usually very easy to rent. On more than one occasion, I have simply put a sign in the ground and received several calls before I returned home. This happened once for a home that is only 1 mile from my home. I rented the home to that tenant and she has been living there for more than 6 years.

David Faulkner · Answer

Unprofitable ones. Because they are not profitable.

What types of properties do you WALK away from and why?

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