How to decide if it is cosmetic vs full Rehab

Question

Hi,

How do you decide if a flip is cosmetic vs fuill rehab. Is it the age of the house. the condition of plumbing/electrical? What do you factor in?

I would rather do cosmetic but I want to make sure the project only needs cosmetic stuff before I start. Is there a way I can do some test myself to make sure the flip requires only cosmetic stuff.

I know I can bring in plumber/electrician but being new in the game they always recommend changes and provide a hefty bid even if there is no need. For example one guy recently updated all copper with PEX which according to my mentor was not needed at all.

so that's why I want to learn how to determine if there is any plumbing or electrical issue myself.

Thanks

Troy Fisher · Answer

Hey Rao,

I'm a little biased, but unless you are an experienced flipper, and/or you have people who crawl through and understand the major systems of a house, there is no "determination" on when things need to be fixed, and the best thing to do is to contact a professional (IE a home inspector!).

On Thursday I did an inspection for a rehabber, I asked like do of all my investor clients, "What is your goal? Down To Studs, Minor Updating, adding square footage? etc..."  This rehab was going to be to update the interior, so the investor only cared about major systems: Roof, Foundation, HVAC, Walls, and that terribly frightening crack in the retaining wall.  As he suspected there was little wrong with the house, and that it indeed was mostly going to be cosmetic or about $65/sqft in seattle.  We did find some major settling, but without an exploration of the foundation and underneath the deck, we wouldn't have discovered that it is an easy fix that he would have gotten hammered on, when he got to a retail sale.

Also, I see that you are in Seattle!  Welcome to Biggerpockets and the local community.  The best people are out there networking everyday, hopefully we get to meet you soon.

Christopher Smith · Answer

Mark Ferguson has a rule of thumb on this call. Which is if you haven't done too many rehabs probably best to stick with properties where only cosmetic work is required, and once you have a few of those under your belt you can take on more aggressive rehabs. I almost sense from your question that you may be the former more than the latter.

If you do pursue a more aggressive rehab was there a home inspection done? That might be a good place to determine if there are must replace or fix items. Mark has a portion of his book devoted to this question. "Build a Real Property Empire"

Matt Stewart · Answer

Short answer...... If it isn't broken don't fix it.

That being said, rarely is a flip ever just cosmetic.  Don't make it overly complicated.  Figure out what needs repaired and replaced and get it done.  If your plumbing leaks, fix it.  Otherwise save your money.

Account Closed · Answer

It's a rare house that needs just cosmetic improvements. But it should be obvious, mostly from the age and condition of the house, if it needs a full rehab.

Don't be the type of flipper that tries to do the least in order to make the most. That's a form of stealing, in my opinion.  Instead, legitimately earn your profits by giving your buyer real value e.g. upgrades and improvement beyond just cosmetic. Of course, this means buying low enough to allow you to do it, so never buy so high that you can't afford do a good job.

Also, don't assume all contractors and tradesmen are dishonest or crooked. It's unfair and counter-productive.  Is your mentor a plumber?  Are you an electrician?  How can you cast aspersions on the advice of professional tradesmen unless you are qualified to assess what they say?

If you intend to flip houses as a business, you are going to need them.  View them as a valuable asset rather than an enemy.

Thomas S. · Answer

The deciding factor is profit - (time + cost).

Polar Prutaseranee · Answer

From an investment standpoint, there's no need to totally do a full rehab on any projects, unless you're basically purchasing a house that's been burned down. The more cosmetic you can do, the better. I can tell you that for some of my flips I'll gut the bathroom..based on how outdated it is and how poor the layout is. But that doesn't mean that the rest of the property needs to be fully rehabbed too. The property where we gutted both bathrooms, we ended up just painting the kitchen cabinets..so it really just depends on what "needs" to be done, relatively speaking. It also depends on your market too. I'm here in the Southern California market, so there's a lot of reflooring even if the carpet is decent. Check out the comps and you'll have a decent idea of what you should fix or leave alone. Good luck!

How to decide if it is cosmetic vs full Rehab

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