By Mike Baird
To the untrained eye, almost every distressed property I’ve ever bought and flipped in my career looks like a total disaster and a money pit. I’ve had people tell me that I’ll never make any cash off of houses that had been completely trashed by the old owners, but I’ve turned those houses into seriously profitable investments almost every time. So how do I do it? And, more important to you, how can you do it? Basically, you just have to figure out how to tell the difference between a trashed house that needs some help and a real disaster that’ll bleed you dry before you can fix and flip it. Here are some tips to help you out.
Disaster – There’s Significant Structural Damage
First, have your inspector, project manager, or general contractor look at the place with you. They’ll be able to see telltale signs of structural damage that you would never catch on your own. This kind of damage requires more than your typical rehab budget will allow, and you absolutely have to fix it before you sell the property or you’re looking at serious legal repercussions. If the foundation is sinking or the house is buckling, nine times out of ten you need to run away from this deal as fast as you can.
Gold Mine – Great Schools and Parks Nearby
Look at the neighborhood and the surrounding area before you agree to a deal. If the property is in a great school district with parks and other attractive amenities nearby, you’re looking at selling points that you don’t have to pay a dime for. If the neighborhood is coming back from a downturn, and more people are starting to buy around your property for its location, you’ll love what your house’s market value looks like when you’re done with it.
Disaster – Lots of Vacant Properties in the Area
While you’re looking at the amenities and other features nearby, take a drive around the neighborhood. Do you see a lot of vacant houses and/or houses for sale? Vacant houses are a deterrent for a lot of buyers because they bring property values down and tend to come with higher crime rates. Houses for sale are competition, so take a good look at what they’re asking and how long houses stay on the market in the area before you commit to buying your flip property.
Gold Mine – It’s Not Listed Yet
If you find a house that looks deserted or distressed that isn’t listed yet and isn’t in foreclosure, you’ve potentially found a real gold mine. I’m not saying that you should try to undercut a motivated seller, but I am saying that if you get to the seller first, before they’ve listed the property, they’re going to be more likely to take your offer, and you’ll be less likely to get in a bidding war with competing investors. That’s why it pays to always be on the lookout for distressed properties and to start chasing leads as soon as you see them. You never know what you’ll find or what kind of bargain you’ll get for it.
These four tips might not tell you everything there is to know about the difference between a gold mine and a disaster, but they’ll definitely get you started. With these and a little bit of experience under your belt, you’ll have no trouble finding great deals and flipping houses for great profit margins. Start looking for your next gold mine deal today, and you might be surprised how fast you can close on it and start flipping.