Spotting the obvious properties to avoid is the easy part. You know, the house that looks as if the wind could blow it over any minute – and has a ‘For Sale’ sign planted in squarely in the front yard to boot.
Then there’s the neighborhoods where front yards are overgrown with weeds, a junk car or two resting on blocks in a yard down the road, and some rotting indoor furniture sitting on the front porch a few houses down all but send you running the other way as fast as you can.
These are the easy ones to spot, and certainly not desirable destinations in any way.
But as you scan the various local neighborhoods where you live, you’ll notice areas around town that seem to be good candidates to have properties ripe for flipping. You might find a house that is in disrepair and in need of some upgrades, and is selling for a decent price.
So far so good. ‘Looks like it could be a definite winner. Certainly no properties to avoid here’, you think to yourself. And this is exactly what someone new to flipping might think – long on enthusiasm, but short on experience.
Buy low and sell high, right?
There’s the bugaboo. Not only do you have to buy the house for a good price, but you’ve got to sell it at a (much higher) price also. And not only sell it, but make a profit to justify all this trouble in the first place.
What To Look For
That’s why it’s important to really study the surrounding houses both next door, down the street, and around the block, and make a decision based on the premise as if you had to live there yourself. You have to view it from a perspective that you’re not only trying to flip a particular house, but you’re also banking on the surrounding houses helping you sell in a sense, as well. Make sure to notice the condition of the property right next to, and surrounding your house.
Just ask yourself the following:
‘Is this a place where I myself could live?’
And if you’re looking to sell to a wider prospective clientele involving families, you might ask yourself:
‘Is this neighborhood a good environment for my kids to grow up in?’
Would-be flippers sometimes make an emotional decision on a piece of property by how much they can buy it for, and by how much it will cost to remodel to make a profit. They seem to downplay the prospect that their house may not sell as quickly as they hope, and may not get the price they think it should.
This is very important because although you’re property may look beautiful, the house next door may be in terrible shape, thereby ruining your chance at selling for top dollar, and in a decent amount of time. Remember, the longer you hold onto a piece of property, the more your bottom line (profit) is eroded.
Examples of Properties to Avoid
If the properties in close proximity to yours, or the neighborhood in general falls under one or more of the following conditions, keep looking. Those types of properties to avoid are:
- Condition of house(s) and yard right next to your prospective house. If one or both are in really bad shape, chances are the people who make the trip to actually come to look at your newly renovated home will not even get out of the car.
- Your prospective piece of property looks O.K. as well as the houses next door. There are parts of the neighborhood that do, however, look generally trashy. This might in fact be due to too many rental properties in a relatively small area. If that’s the case, you will notice that rental properties in general tend to fall into a little more disrepair faster than houses that are owner-occupied. Would-be owners will only tolerate so much neglect, even for a relative few houses.
- The neighborhood looks decent, as does the house, but it (the house) backs right up to something such as a huge apartment complex or shopping mall, or sits right on a major thoroughfare. This might be O.K. if the property/road in question (apartments/mall) is in really nice shape and is somewhat quiet. Otherwise, definitely a turn-off for families with small kids, and they (the prospective homeowner) will let you know that right away.
- If the house looks to be lying in a floodplain. I know real estate agents who will decline to represent a potential client if the house is in close proximity to a creek or river. People (buyers) will stay away because of high water concerns. High on the list of properties to avoid.
- If the house has excessive remodeling issues. This alone renders many would-be flippers afraid to ‘take the plunge’ as it were, and for good reason. Not enough renovation expertise resulting in too many dollars going out.
These are issues with which you must be attentive. In some cases, they can be overcome, but in general this is not the case. If, however, you can negotiate a price to buy to buy where it can make sense, and the numbers work, then by all means go ahead and buy, but buy with caution.
In the cases of properties to avoid, an experts opinion would help greatly, someone like a real estate agent. Someone who might know the area in question really well and could tell you what type of person may be interested in the property when fully renovated, and how much they might be willing to pay.