Billy Blogger’s REI Beat: Keeping an open mind can mean dollars
This past Saturday, a couple of students for REI Systems Academy, Russ Keith, and I walked a property. This property was found on MLS in a nearby suburb. I walked in expecting to see a home in need of massive repairs and ripe to fix and flip.
Russ Keith explained that its best to have a system so you don’t miss anything. Part of this system should include a checklist. As we walked the house, we looked for things like cracks in the outside/inside walls, power outlets, possible plumbing issues, and cosmetic changes we can make.
This particular house didn’t have any noticeable structure damage. No cracked walls. We did notice some wrinkled wallboard and yellow streaks in part of the ceiling in the kitchen indicating a leak. We looked at the roof over that part of the house and noticed some rotted wood where a gable meets the roof. That is most likely the source of the leak. While outside, we noticed some trees with overgrown and dead limbs.
The most troubling problem was the bathroom. I noticed some newer looking plumbing under the sink and a squishy weak floor. It looked like the entire bathroom needed to be redone. This is by far the most costly repair for the house. The other glaring thing I noticed was a lack of ground fault circuit interrupter outlets. We should see one on every circuit near a water line. The saying goes, “water and electricity don’t mix,” but that’s not exactly the issue. I’d say water and electricity mix too well, which is why it causes fiery problems.
This brings us to kitchen remodeling. Four people, and at least four ideas on how to remodel the kitchen. Everything from removing an interior door to removing a wall, to adding a dishwasher was discussed. The one unanimous thing everybody could easily agree on was the hideous, yellow paint had to go.
After pictures, measurements, and notes were taken, we left and headed to a nearby restaurant. I learned as much at the restaurant as I did walking the property. We discussed the problems with the property, and used a spreadsheet Russ Keith gave us to estimate repairs. This is a huge time-saver. We plug in the repairs and it gives the cost of the repair while tracking the total. We then moved the conversation towards the exit strategy for the home. What I was expecting at the beginning was a solid flip house. Due to the few repairs and proximity to local college campuses, we all determined that it would be much more lucrative as a rent house. Especially if we were to rent it by the bedroom for college students. An open mind on the exit strategy could make this investment more lucrative.
We looked at the home and similar homes on MLS. Within the MLS is what is called a seller’s disclosure. This is where the seller lists what the seller knows needs repair. The first thing we noticed on this disclosure was that the seller didn’t mention the weak floors in the bathroom. I thought to myself, “How long can this guy own the house and not use the restroom there??????”…….All jokes aside, it’s best to take these seller’s disclosures as being at the very best incomplete and at the worst, complete fabrication.
The final thing was looking for capital. We called a random money lender, the type that can be found online. REI Systems has thousands of them in their network. We had the cell phone on speaker as we listened to Russ Keith and the lender discuss terms of possible financing for both this and future deals. I literally sat and basically eavesdropped on the conversation. (Of course, all parties knew I was listening). I heard both sides of the conversation. This is a good way of learning what questions to ask and what questions to expect on these calls.
The biggest takeaways are to be prepared to find things that need repaired, be prepared to estimate repairs, and be prepared to …………….completely change your exit strategy.
Written by Billy Blogger.Tags: dallas dfw don't judge a book by its cover education house flip real estate investing real estate investor training REI Systems Academy reia training