Aloha friends and welcome to the first installment of my new post format!
In this series, I will try to pass on some of the best info I have learned over the course of my adventures in real estate and home renovations. The information will start out basic at first, and then evolve into specific renovation projects and more in-depth real estate info.
While it’s true that real estate is fading as a viable investment, at least when compared to internet sales or eCommerce, owning your own property is still a great way to build wealth and hedge against inflation. Much of the information herein will be common sense for people already in the industry, but hopefully you will find my unique perspective on this subject entertaining or informative in some way.
My Background: I started working on houses as a kid. My parents would buy investment properties and pay me to fix them on the weekends. This taught me a great deal about real estate, home improvement and property management. Working as a Civil Engineer, I was able to buy and renovate a few places of my own, and I picked up a real estate sales license to save on commissions.
Over the years, I have attempted all sorts of projects, large and small, with varying degrees of success. I have nearly electrocuted myself several times, needed multiple tetanus shots, and made a lot of questionable decisions. Hopefully, you are smarter than me, and can learn from my mistakes!
Purchase Good Real Estate
In a good market, everything sells. In a down market, a bad house won’t sell.
Choosing a quality piece of real estate is the most important factor in any purchase, whether it be for investment or personal use. This can change, depending on your timeframe, but for the purposes of this article, we will assume that you are in it for the long-term.
Think Like the Buyer Archetype for the Property
This means that if you are looking at single family homes, you should be evaluating the property as if you were a nice, wholesome nuclear family… kids, dogs, two cars in the garage, etc.
Looking for a condo, duplex, etc.? Then your archetypal buyer is going to be a single professional, younger couple or DINKS (dual-income, no kids – the gays, etc.)
You can extrapolate this thinking to any type of property class, whether it be agricultural land, vacation properties, etc.
Think Like a Woman!
If you are one, great, move to the next section! Guys, women have a different, and much more rigorous evaluation criteria for properties. Sure, you don’t need a half bath (powder room), or an in-house laundry room, but I bet you she does! Women make the decisions when it comes to purchasing a home. If she can’t imagine herself living in the house, she won’t want it! If you are single, ask your female relatives, or that girl who put you in the friend-zone about property features – they will be happy to help!
Imagine the Potential, Ignore the Smell
I love smelly houses! Cats, smokers, people who don’t clean – it all smells like money to me. A smelly house is a great opportunity, as it will scare away other potential buyers (especially the ladies from the previous section). Carpet cleaning costs $200, paint costs $200, you will easily recoup this cost when you can save money on your offer or use this during negotiations.
Try to ignore the avocado colored appliances, brown shag carpet, popcorn ceilings and wood paneling. All of these things can be replaced easily. They will also scare away potential buyers, which makes your life easier. Remember that cosmetic issues = potential.
Look for “Intangibles”
Questions to ask yourself about the property, and remember, while you’re answering these questions, it’s important to put yourself in the shoes of your property archetype.
How many square feet is the property? How many bathrooms? What type of kitchen does it have? Are these numbers typical for the neighborhood, or is this house abnormally small/large?
An example of this would be an 1,100 square foot 2 bedroom, 1 bathroom house, when the rest of the neighborhood is 1,500-1,800 sq. ft. and and 3/2. This would make your house relatively undesirable compared to the rest of the neighborhood. However, it is always better to have the crappiest house in a nice neighborhood, than the nicest house in a crappy neighborhood!
The most important room in the house is the backyard. The kitchen can be updated, walls can be added or removed, but the yard is forever. While it is true that you can add a deck, or improve the landscaping, the overall size and functionality of the backyard is pretty much fixed. Ask yourself which has more potential, a fixer-upper with a great yard, or a beautiful house with a dinky little yard.
How far is the closest Supermarket? Can you walk to any restaurants or bars? How far away is a dry cleaner or dog park? If you are in an urban setting, does it have laundry hookups? Where is the nearest laundromat?
While you are evaluating the property, try to imagine living there for two full weeks. Will you be saving time on errands or spending more?
Where will the most likely buyers of this property be working? Do you have employment centers nearby, or will they be commuting into town? How long does it take to get to “employment center” during rush-hour traffic?
Buying a house in the boonies can be great if you want some space between your neighbors, but not being able to order Thai food on the weekends is a major drawback for some. Also, post-covid, no one wants to drive 90 minutes to work twice a day. Studies show that reducing commute is directly proportional to happiness.
Depending on what type of property you are buying, schools can be a huge factor. In some cities, people will pay a premium to be zoned for certain school districts. Even if you don’t have kids, try to be cognizant of which schools a property is zoned for, and if there is any redistricting on the horizon, which could change your situation.
- The yard is tiny, but I don’t have a dog, I spend all my time indoors!
- It’s on a busy street, but I’m gone most of the day!
- The neighborhood isn’t great, but it will improve!
Deal-breakers – Avoid at all Costs!
Never purchase a property with known structural defects, period. Even if it’s minor, even if you have a quote for repairs. The fact of the matter is that once the foundation has started to settle, it will not stop. You can spend money on stabilization, foundation repairs, wet-jacking, cock-blocking, whatever, it will not fix the problem permanently.
The only exception to this rule would be if you plan on demolishing the structure in the near-term and going the new-construction route. If you are reading this, you’re probably not at that level yet, so just don’t do it!
Do not buy a house in a floodplain! Flood insurance is NOT covered by a standard Homeowner’s Insurance Policy and will have to be purchased separately.
You can check to see if a property is within the a floodplain by checking FEMA’s National Flood Hazard Layer.
For whatever reason (Global Warming, CERN Weather Machine, witchcraft), rainfall numbers are increasing all over the country. This trend is likely to continue, which means that even if your prospect is not in the immediate danger zone, it will be soon. Do yourself a favor and avoid the floodplain!
The neighborhood is not going to gentrify as fast as you think. Homeless encampments, government housing and sketchy neighborhoods should be avoided. If you have a 10-15 year timeframe to wait for that crackhouse to turn into a Starbucks, then go for it. In the short-term, be sure to invest in a security system and some boxing or BJJ classes.
There are lots of great websites like Neighborhood Scout that you can use to check out the crime statistics for your potential property.
That’s it for now! If you enjoyed reading this, please subscribe, and if you have any questions, feel free to leave a comment.
- Making the Deal – Tips for a smooth transaction
- Planning Renovations – Now that you bought it, what’s next?