Through my experience flipping over 10,000 houses, I’ve learned almost any property can be a great investment if you get it for the right price. The thing is, though, you really have to know what you’re getting into and what that “right price” is. You might find a house that’s priced way below market value, but when you get inside you find out that it needs so much work that you’ll never be able to get it into shape and sell it at a profit if you don’t buy it at an even lower price.
In addition to figuring out the price that will make a flip house a great deal, I’ve learned to look out for a few serious deal breakers. These are details and factors that will ruin even the best deal on the most beautiful house. No matter what else a property has going for it, if I see any of these pop up, I immediately walk away and look for another property.
Lots of Vacancies in the Area
Like any good investor, I like to check out the MLS pretty regularly for great flip deals. If I find a house that looks like it’s going to be a great deal and the price is right, I’m definitely going to be interested, but I’ll never pick up the phone to make an offer before I take a drive to see not only the house but the whole neighborhood.
If you drive through a neighborhood where you’re thinking about buying a flip property and you see a lot of vacant, distressed properties, you’re probably looking at a poor investment. This is a sure sign that the neighborhood is in decline and that you’re going to have a hard time selling once you’re done with rehabs. Even if the neighborhood is just starting to come back from a decline, and other investors are fixing up those vacant properties, you’re going to have a lot of competition when it’s time to sell. Walk away and look for a better neighborhood where you’ll be able to sell fast.
It’s Right Next to a Busy Highway
The neighborhood isn’t the only thing you’ll have to look out for when it comes to a flip property’s location. Easy access to highways so that buyers have a convenient route to work is great, but you don’t want the house to be right next to the highway. Buyers care about things like noise pollution and air quality. If the house is right next to the highway, you’ll want to make sure you have plenty of margin to sell it at lower than its theoretical market value.
Asbestos insulation can last for years with no problems, but when it starts to break down, it’s toxic. Your buyers will know this, and they’ll use it as a bargaining chip. Not only that, but if the asbestos insulation on your pipes has already started to wear down, you’re looking at a really lengthy and expensive process to replace that plumbing. In my experience, it’s just not worth it.
These aren’t the only things that can make a flip deal go south, but they’re my least favorite to deal with and they’re the ones I’ve had the most trouble with whenever I’ve ignored my gut and gone ahead with a deal. So take my advice—if you see any of these deal breakers, it’s time to get back in your car and go find another flip. There are too many great properties out there to mess around with ones that will cost you time, energy, and lots of money.