Page 15 - From Ghetto to Gucci: The Basic Principles of Flipping Houses

impossible to fully inspect a foreclosure before you buy it, barring some lucky circumstance.
This risk premium is what can make foreclosures such a bargain, but it’s also something that
you can guard against by understanding clues that tell you the story of the house, and what
repairs you’ll have to make.

First off, if you’re buying foreclosures at the sale you’ll need to see the property before you buy.
Never buy a property that you can’t see for yourself before you buy! Later on as a
more-experienced flipper you might have a knowledgeable craftsman look at houses for you,
but in the early stages of your flipping career it is absolutely crucial that you spend the time to
look at the house yourself.

I’ve personally learned this lesson, sending in someone that I trusted who turned out not to be
able to recognize a huge problem in a house. I had sent my friend to look at a house for me,
and he told me that everything looked fabulous, it was already finished, painted, and looked
good. I trusted him, and bought the house at auction. It turned out that the foundation was
sinking into the ground, and I had to pay a tremendous amount of money to lift the house, and
re-do the entire foundation. His untrained recommendation cost me thousands of dollars, and
we lost money on that house.

What you want to do in a foreclosure is simple. Go up to the house, and ring the doorbell. If
someone rings the doorbell, you have a chance to talk with them, and potentially learn more
about the house. Introduce yourself, and have a little chat with them if you’re able. Ask them
about the house, the neighborhood, their life. Some people are willing to talk, and they might
even invite you into the house. Others will respond angrily, and shoo you out. Regardless of
what happens, you’ll have gotten more information about the house and the person within.

If the person gives you permission, you might even be able to poke around the house, crawl in
the crawl space, check out the foundation, and get an up-close look at the condition of the
inside. If you don’t, you’ll still be able to make a good assessment of the house from the outside.

When you’re at the house, step across the street and take a good look. Does the roof look new?
If the roof is in good shape, that’s a big-ticket item that you won’t have to worry about. Take
another look at the house. Are all the lines straight? A crooked house or a sagging roof can
betray significant foundation work that needs to be done, which is another huge charge. As a
beginning flipper, you’ll want to avoid that.

Now take a look at the yard and condition of the house. Is the yard weedy and overgrown, or is
it neatly manicured? Oftentimes, a neat yard means that someone cares about taking good care
of things. They might not have the best and nicest, but they’ve taken care of what they had. If

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