Seeing Through the Eyes of a Flipper

[Shannon McKenna]

Hello Flippers!

Here's my story: I'm new to the real estate game- just establishing my funding and obsessively farming an area in my city that I KNOW is going to kill it in the next 5 years.

My strategy is buy and hold, with my first property being being a house hack, and my plan is to move into a place that isn't turn key- something I can build up myself (I'm young and able bodied, and I wanna do it) or with the help of some light contracting.

I ran in to two potential flippers walking through the same property. Listening to them talk, I feel like they were searching for trap doors. They were knocking on walls, jumping on floorboards, and had a mess of concerns I didn't even fathom. 

My question is: What are the top 4 things you flippers look at when you're walking through a property? Do you have a checklist? 

As far as this specific property goes: I have no interest in it. It's half baked craftsman with a floor plan that left me scratching my head as to how anyone could call it a three bedroom.

[Terrell Garren]

Have someone that knows what they are doing look at the foundation, roof (down to the sheathing), electrical and plumbing. Don fret the small stuff - dirty, smelly, holes in walls, etc. as that is equity waiting to happen.  I love the smell of pet urine in a property for sale...

[Christopher B.]

Honestly, a lot of those things you will learn to look for after you missed them initially only to discover you have to fix it later. This is why it's so important to buy something with margin.

[Mike B.]

My big concerns as noted above, include the condition of the: 

Electrical - is it newer wiring or knob and tube (and do I need to re-wire the home)?

Plumbing - old pipes or copper present?  Drain line.. is it the old cast iron and look crummy or is that good?

HVAC/Heat - does it need replacement? Do I need to upgrade gas forced air to central air system?

Walls - plaster or is drywall present already? 

Other big ticket items to consider: Flooring and bathroom/kitchen next.  

Roof - I don't care about as much.. in Philly we have flat roofs, so it's much cheaper to fix and/or replace (vs. shingles).

Always pay more attention to your 'big ticket' items.  Bad smells, needs new paint.. no big deal and easy/cheap to fix.

[Shannon McKenna]

@Terrell Garren Thanks for the reply! I think bringing my mentor along is a great suggestion. 

[Shannon McKenna]

@Christopher B. Ugh- the harsh reality of trial and error! I guess my real fear is that I'll buy something that I think is a fixer upper, only to realize it belongs more in flip land. How do you distinguish between the two?

[Shannon McKenna]

@Mike B. This is a great list! Basic, straight forward, totally helpful. Thanks for your contribution, I appreciate it. 

I lived in Philly for a couple of months- Germantown area. I loved it! If you were in Atlanta, I would bring you along as per Terrell's suggestion!

[Christopher B.]

Originally posted by @Shannon McKenna:

@Christopher B. Ugh- the harsh reality of trial and error! I guess my real fear is that I'll buy something that I think is a fixer upper, only to realize it belongs more in flip land. How do you distinguish between the two?

Control the controllables. Success in this business is A LOT of hard work but the formula is simple. You need to know 4 things:

1. Purchase price 

2. Sale price or ARV

3. Rehab Costs (construction knowledge)

4. Expenses (buy/sell costs, holding, etc)

So your weakness is construction knowledge, that's a big weakness and only time and experience will resolve that. The short-term solution is working with a partner or more expensive contractor that can make-up for this deficiency. So become highly proficient at the other variables to mitigate your weakness.

Any house can be fixed of you throw enough money at it. Sometimes it's worth it, sometimes not. So the answer is knowledge. Become the comp master, if you're confident a house can sell for 300k and you can buy it for 50k, probably should look into, right?

[Shannon McKenna]

@Christopher B.

Rockstar response. I totally hear you. Thanks for the feedback. It's better to know a weakness and account for it, then discover it through folly for sure. 

[Christopher B.]

Originally posted by @Shannon McKenna:

@Christopher B.

Rockstar response. I totally hear you. Thanks for the feedback. It's better to know a weakness and account for it, then discover it through folly for sure. 

 Exactly. Look into j Scott's book on rehab estimates for how to estimate costs plus some starting guidelines on what things cost, he worked out of Atlanta when it was written. It's a few years old now and inflation has probably adjusted some of the prices but it will be a guide starting point for you.