Buying a home to renovate in order to resell for a profit in a short period of time is called “Flipping”
These homes are usually remodeled by an investor looking to make a quick profit. Often times these homes were in major disarray when the investor purchased them. Some of the investors purchasing homes and making improvements are very skilled at their craft. They completely go through the property and make sure the roof and foundation are in good condition as well as the plumbing, electrical and hvac systems. I currently work with an investor who only uses licensed professionals and always gets the proper permits. But not all investors do that.
Some investors will cut corners. They may use low-grade materials or do substandard work. There are several ways to hide problems which may later become issues for the new owners. Some investors tend to cover up problems rather than repair problems.
So how does the buyer know what they are buying?
1. Ask the seller for a list of all repairs that they made and verify that all necessary permits were pulled.
2. Make sure you get a complete inspection, remember this seller has not lived in the property and done laundry or showered while running the dishwasher, etc. so verify that the systems work fully.
3. Call the water department and see how many gallons of water have been used since the investor owned the property. Since the investor has not lived there, the usage should be low. If it is high, you might have a leak.
4. Turn all the water and gas off to the property and check the meter to see if it is running. Recheck after 15 minutes. Nothing should be on including the water heater or furnace (sometimes people forget the gas on at the pilot). If the meter is running you may have a leak.
5. If it looks like they tried to cover something up, they probably did.
There are a lot of honest people making a living repairing dilapidated properties and reselling them at a profit. The repairs on these properties are not cheap if they are done correctly. The investor should be able to make a reasonable profit. In order to correctly repair the properties and make a profit, this often means the investor must have purchased the property for less than half the price they are selling the house.; especially when the house resells for $125,000 or less. When a seller buys a property and resells it within a 12 month period to a buyer obtaining a FHA loan, the new lender will require a second appraisal. In addition, unless the property was a repo, the investor must wait 90 days before a contract can be written where a buyer is obtaining a FHA loan.
For more questions regarding real estate in Oklahoma City/ Moore please call me at 405-213-2992 or visit my website www.sandiwalker.com