Flipping Houses: Waterfall House-Part 1
The “Waterfall” House
This house was a foreclosure we found on the MLS. Our intent was to flip this house, so the purpose of the first visit was to fill out the Property Repair Estimate Sheet (our punch list) and the Deal Analyzer to determine our offer. When investing in real estate it is important to not waste time completing work on homes you may not even purchase. With the proper systems, you can review the property and the comps and make an offer during your lunch-hour. While this home had the usual repairs, painting, carpet etc, there were 3 big challenges.
1. The upstairs plumbing had burst at some point. The ensuing waterfall descended from the second story through the kitchen ceiling, over the cabinets, into the dining room, before dropping into the basement and finally flowing out the garage. As you can see from the pictures, the damage was extensive.
2. The only bathroom on the first floor was the master bath and there was no real way to add another 1/2 bath anywhere.
3. There was a steep hill immediately behind the house which made the back yard very small and visibility from the house limited.
Problem one would be essentially easy for our team to resolve. It would involve repairing the broken plumbing, removing all the damage, and replacing everything. When flipping houses, some jobs are larger than others.
Problem two, unfortunately, could not be resolved. Some properties just have primary issues that our team has no way of fixing. These are known as functional obsolescence.
Problem three is a combination of the two types of problems. There is a nice flat area at the end of the driveway that is usable. Making the yard immediately behind the house as usable as possible would increase the number of buyers that would consider the house.
Investing in real estate often involves weighing the pros/cons of a particular deal and determining whether to proceed. We decided we could flip this house and overcome the cons by upgrading the interior and pricing the property competitively. After reviewing comps, we were able to submit an offer to purchase the property.
Tune in the next few weeks to see what our team did to combat these challenges.
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