Flipping houses can be a lucrative business — if you know how to do it right, that is. It goes without saying that fixing up a house and selling it for a significant profit is one of the best feelings for any real estate investor. But don’t let a house’s “potential” lead you to a devastating mistake.
Many expenses come with renovating a house, especially if it’s a fixer-upper. No matter how low the asking price is, always do your due diligence. Find out if the house needs major repairs that come with hefty price tags, such as:
A home’s heating and air conditioning system is one of its most important components and is usually a big concern for many homebuyers. When you have a home inspection done, the HVAC is usually one of the first things they look at, and you can easily find out if the system needs repairs or even replacement.
The average cost of replacing an HVAC system is around $5,000 to $9,500, depending on the size of the home. If you don’t want to pay that kind of money for a new HVAC system, hire an HVAC specialist to ensure that it is still in good shape before making an offer.
The average roof lasts for about fifteen to twenty years, depending on the material used on it. Hence, roof replacements are quite common in fixes and flips, especially for houses with roofs that have never been replaced. If the roof of the house you buy needs replacing, you may be looking at around a $5,000 to $15,000 expense on this alone.
A roof replacement may not be a sign to cross out that listing. However, you will need to get an accurate estimate of how much you’ll be spending on the roof if you buy that property. Work with a contractor that you already know and trust. If you don’t have one yet, find one that has a great reputation and get an estimate from them. Better yet, get estimates from at least three contractors before choosing one to work with.
Foundation damage often equals thousands of dollars in repair. Moreover, problems in the foundation can lead to other problems in the home, as it affects the structural integrity of the entire house. Thus, it is highly advisable that you get a second opinion after the initial home inspection. It is not uncommon for foundation issues to get past the first inspector.
To give you an idea of how much it will cost to repair a foundation, the value can be anywhere from $10,000 to $40,000 or even higher. The reason for this is because foundation issues need to be addressed at the root. It is not enough to seal cracks or readjusting the doors (common signs of foundation problems); you will likely need to hire a professional to install new foundation piers, reinforce the existing foundation, or perform other major fixes.
Exterminating pests from the property may not be overly expensive, but the damage they have caused makes this problem very costly. Chewed up electrical wiring, holes in the wooden structures, and destroyed foundations—these are just some of the types of damage that pests can bring to a home. If the pests are a long-standing problem, the extent of the damage may be severe.
A great way to avoid falling into this trap is by having a home inspector look for signs of pests. Better yet, have a pest control professional do it. If they confirm the presence of pests (especially termites, rodents, and fire ants), determine what kind of damage has been done before deciding if the property is worth your time.
The siding of a home endures a great deal of damage over time on top of normal wear and tear. Luckily, you can easily determine if the siding of a house needs repair or replacing by doing a walk-around of the home yourself. If the siding is due for a replacement, you are likely looking at an expense over $10,000, depending on the size of the home. Moreover, you will also need to consider the time it takes to complete a replacement, which can significantly affect your renovation schedule.
Underestimating repairs and replacements is one of the biggest mistakes that a house flipper can make. Before making any purchases and starting out renovations, make sure you check every aspect of the house. Don’t let yourself get sucked into a money drain — be aware of these biggest expenses and tread on carefully if you spot them on a prospective property.