When you read advice about home renovations — from myself or any other expert on the subject — you’ll hear that the worst mistake you can make is not doing your homework. If you don’t research the local market trends, market prices for nearby comps, potential liens on the property, etc., you’re asking for problems. You don’t want to buy a house that won’t sell, and you don’t want to find out that buying the house will mean that you’re inheriting extra debt with it either.
Of course, there is one problem when it comes to doing your homework — sometimes you can’t get inside the house before you bid on it at auction or make an offer to the seller. Sometimes you’re left standing on the curb, wondering, “Is it a good idea? Is that house hiding damage that I’m not going to be able to afford?”. Fortunately, when you are in this situation, you do have a few options to help you make your decision.
See as Much as You Can
First, get as close to the house as you can, without trespassing. If the house is occupied, you cannot approach the tenants or owners and ask them for a tour, so don’t bother them. However, without disturbing anyone or trespassing, you can still take a look around the property to get a better idea of the condition. While the interior of the house could be hiding some expensive atrocities, taking a good look at the exterior can tell you a lot, too.
If the property has a pool, you can expect it to be an expensive rehab, but keep in mind that pools add a lot of market value too. Make a note of what kind of condition the pool is in. Then you can talk to your contractor about what you saw and get a rough estimate of what you’ll be looking at for rehabs, to make a more informed decision.
Research the History of the Property
Next, research public records on the house you’re looking at. This will let you know if there are any liens on the property, and you’ll be able to find out who owns the property and if they actually live there at the moment or not. Finding out that the property is inhabited doesn’t necessarily mean that it’s in amazing shape, but it does lessen the likelihood that the roof will be falling in and the foundation will be crumbling.
Research the Neighborhood
What amenities are available near the house you’re looking at? Look for good schools, attractive shopping centers, parks, recreational facilities and other things that will appeal to buyers and make them want to live here. Then research the prices on comps in the area. If the market values in the neighborhood are high enough, and the community is growing, you’re probably looking at a good deal.
Unfortunately, there’s never a guarantee that you’re not going to find out that the whole place has been gutted or that it’s rotting from the inside out. Even in those cases, though, if you have a property in a good area where people want to live, you can come back from even the worst rehab disasters.
And remember, if you’re really uncertain about whether or not a flip property is going to be worth it, there’s nothing wrong with walking away and moving on to your next lead. Remodeling can be a risky business, but that doesn’t mean you have to take uncalculated risks that don’t make sense. Keep your lead funnel full, and continue looking for other options if you don’t feel confident about buying a house sight unseen.