Whether you are brand new to real estate investing or you have several years of experience up your sleeve, there’s a good chance that you’ve experienced the anxiety that comes along with buying a fix-and-flip property. Are you going to profit, or are you going to find yourself in a bottomless money pit? Below are five different ways to tell whether you’re getting a great deal or getting in over your head.
#1 – Look at the Foundation
Without a solid foundation, it’s impossible to have a solid house. Before you buy any property at all, always check the foundation. Better still, hire a professional to inspect the foundation very carefully. If there are any signs of sinking or rot, or if the foundation is cracked, the expense involved in fixing the home may end up being more than you’re willing to spend.
#2 – Test the Electrical System
Another serious money pit that is best avoided at all costs has to do with the electrical system. Sometimes the issue may be relatively simple, such as an outlet that needs to be replaced or a fuse panel that needs to be updated. In other cases, though, wiring issues may exist all throughout the house, and that’s a tremendous expense. Before buying any property, be sure that you take the time to carefully inspect the entire electrical system (or hire a professional) and note any issues you come across.
#3 – Check for Plumbing Issues
Plumbing is yet another issue that might require you to have some seriously deep pockets. Like electrical systems, plumbing issues range from slight to extensive. Things like major water leaks, cracked septic systems, and broken drainage systems can cost thousands or even tens of thousands of dollars. Be sure that you consider all of these before you buy any home.
#4 – Stay Away from the “As-Is” Listings
When a seller lists a home for sale “as-is,” this is a telltale sign that the home needs some extensive repairs. Though you may stumble across the occasional diamond in the rough here, it’s almost always best to avoid any home or property with “as-is” attached to the listing. Remember that when you buy such a property, you’re buying all the problems that come with it. No matter how low the price, sometimes it just isn’t worth it.
#5 – Be Aware of the Signs of Termite Infestations
Finally, it’s important that you remain diligent regarding termites when looking at various properties. It’s relatively easy for property owners to “cover up” termite issues since they cause primarily structural damage to the floors and walls. Some of the other signs of infestation include foundation cracks, bowing or sagging floors and walls, and even “pellets” scattered throughout the house. To be safe, you may want to have an exterminator scour the property before you agree to buy.
These five tips are only the tip of the iceberg when it comes to telling the difference between a money pit and a fixer-upper. The best way to prevent any unwanted surprises is to cover all your bases before you buy and hire professional inspectors.