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How to Avoid Accidentally Buying an Investor’s Flip House

Jun 08, 2018

house-for-sale-sign.jpg

 

When we talk about flipping houses, most of us think of being the one to flip the house.


But what if we’re the ones buying the already-flipped house?

It makes us wonder (or should, at least)… did they do a quality job, or will their quick renovation done on the cheap end up costing me loads of maintenance and repairs I never signed up for?


I’m not talking about home owners, by the way, who live in the property and DIY some updates before selling. I’m talking about investors who are trying to make some quick cash with cosmetic fixes before selling to an unsuspecting buyer. Those are the ones to watch out for.



These are the houses that have got the newly installed fancy toilets and trendy cabinetry, and even feature some funky knock-off lighting that draws our eyes like moths to a bug zapper. Here’s the thing about flip homes – they’re usually not in great shape to begin with. So when an investor comes in meaning to make a quick buck by adding cosmetics and reselling, it’s scary. They’re all lip gloss and eye candy, which is why I call them the Maybelline Homes.


I remember seeing one house in which the owner DIYd a kitchen renovation. Apparently forging ahead without the wise council of an inspector or engineer, they removed a wall from the kitchen, not realizing (or caring?) that it happened to be the supporting wall. The load bearing wall wasn’t even replaced with a beam. As a result, the second floor was sagging visibly. I couldn’t help but think, it all looks sexy until the sky falls in…


There are many others. One flip house renovator did not install p-traps under bathroom sink, which meant sewer gasses can enter into the house. Unhealthy and dangerous not to mention a horrible smell.


In another home I showed, (or attempted to show), the house had a well pump drilled into the basement floor. I don’t know why. It was a house right in Winnipeg with access to city water. It was weird, but there it was. The trap in the well pump had dried out after years of disuse, which meant sewer gas floated straight up into the house, so.much so it was evident on the main floor. When we walked in, I smelled it immediately. When we approached the basement room where the well was, the smell was overpowering. I actually had to go to the respiratory doctor after that, it was bothering my lungs so much. “You burned your lungs,” the doctor said. I couldn’t help but think of the kids who lived in that house, breathing that in all day. What was it doing to them? Then I wondered just how unhealthy and potentially flammable all that gas was.


Okay, so those are interesting and true, but aren’t examples of lip gloss and eye candy.


Most of the time, the giveaways of a bad renovation job are more subtle than overpowering, lung-burning gas. Most of the time it’s the unseen stuff like double-tapping an electrical outlet, which means running double wires into a fuse.  Or like using too large of a breaker or fuse because golly gee, the appliances couldn’t be run at the same time without popping the breaker, so that’s how we quick fix it. (Note: the real solution is to upgrade the entire panel or adequate circuit updating by an electrician not slap a bigger fuse in there and hope for the best)... Fire hazard in wait!


There are other tell tale signs too, things that need permits for example. I’ll routinely run searches on homes my buyers are interested in to confirm if there have been permits taken out and closed. When we get to the home and I see renovations have been done that required permits – like an electrical panel upgrade, for example, but no permits were acquired, I know there’s some sneaky stuff going on that could cost my buyers down the road, and will warn them.


Recently, I showed one such fixed up flip home to a client. The price fit squarely in my client’s limited budget. As soon as I pulled up the house details and saw the seller was something like 12345678 Manitoba Ltd., I suggested my buyer look elsewhere. The chances of this being one of those Maybelline homes was quite high with a seller name like that. Of course, not all investors are shady. Not all investors are limited companies either. Sometimes, being in the industry, you see the seller’s name and know the reputation that goes with it. You know some of the stuff they do (or don’t do) in their typical renovation projects, and know to steer clear.



In my lengthy career I can only think of two times ever that I was comfortable enough to transact for my buyer on an investor home. Only two. In one case, I knew the seller and knew the quality of care they put into their work. I had no problem helping my client buy that one. The other investor had been a client, and I coached him from the start on selecting properties and the improvements to do, and as an investor he truly took pride in his work. He was not trying to cut corners or cover stuff up like so many do. His renovations were designed to boast the beauty of the house, not to distract from shortcomings.



Low-priced flipped houses can be tempting, especially on a low budget. Especially now that the new mortgage rules have shrunk your budget. If that’s you, I have two critical pieces of advice for you. First, be patient. It will take time to find a quality home in your budget. Second, if you’re not hiring a professional Buyer’s Agent to protect your interests (why not, again?) then, as you look at properties, remember to look past the beauty of the home, through to the structure. Don’t let the mesmerizing décor distract you from the plumbing and electricity. Inspect it thoroughly because you might fall in love with the Maybelline model home you first set eyes on, but you’ll soon discover the sagging floors, flatulent plumbing and short-circuits in wiring, that was hidden behind it, and you’ll be the one who ends up paying for it.



Category: Buying a Home


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