The objective when we buy houses or "flipping" is of course to get in and rehab the house as quickly as possible and sell it for the most amount of money possible. With that in mind, I’ve outlined three major maintenance headaches that can kill the profit in your deal overnight.
MAINTENANCE NIGHTMARE #1: FOUNDATION ISSUES
One of the first things you need to look at on a house you’re looking to buy is the quality of the foundation. Whether the foundation is a crawlspace, a basement, or even a slab, you want to ensure that it’s in good shape. Look for water damage, cracks, uneven areas, chips, broken areas—anything that looks out of place. If the foundation of the house isn’t in good shape, you’re going to be looking at a huge repair job that will take a lot of time and money to complete. I’m not saying it can’t be done—if you can get the house at the right price, all types of repairs can be done without a problem. But it’s important that you go into these situations with your eyes wide open. The good news is that by carefully walking around the exterior of a house, you can generally tell if there are any major issues.
When you walk into a basement, look for signs of water and cracking, and examine closely any areas where the grout seems to be worn out or there are water stains on the walls. Also, don’t be afraid to examine the mechanical systems to see if they show signs of water damage. If you do see any warning signs of current or previous foundation issues, then consider carefully whether it still makes sense to move forward with the purchase. For new real estate investors, I do not recommend tackling rehab jobs of this magnitude. Instead, exercise the right to inspection clause in your contract and terminate the purchase agreement.
MAINTENANCE NIGHTMARE #2: ROOF’S IN POOR SHAPE
Replacing a roof is another high-ticket item. When you’re walking around the property, don’t forget to take a good look at the roof and the gutters. Are there any visible indents or grooves in the roof? Are there shingles loose or missing? Look at the actual condition of the homes shingles themselves. Shingles that curl up or have two layers indicate that the roof is old and very likely needs to be replaced.
MAINTENANCE NIGHTMARE #3: ELECTRICAL CAPACITY
This issue is often overlooked but can mean you have to rewire the entire house. Head over to the electrical panel and take a good look inside—you want to ensure that the house has a minimum of 100 amps. If it doesn’t, the house poses a fire hazard and has electrical issues that you will have to fix. While we’re on the subject of electrical, take a look at the furnace and don’t be afraid to get it professionally inspected if you have any doubt. This is another big-ticket item that can seriously cut into your profits if you don’t plan for it.
When buying a property, don’t allow yourself to overlook these key maintenance issues just because the sellers are offering a great price. Be discerning. Maintenance issues are your job to fix and should never be passed along to a buyer (unless you’re wholesaling the property, in which case the buyer is fully aware and adds the repairs to their maintenance list.) If in doubt, get a second opinion from your trusted contractors like I do.