Q: What is the first thing you look for when considering whether to buy a house that needs to be remodeled?
A: The location of a property is key. You don't want to spend too much money on a house that's not in a good location. You might be able to get away with spending more money on a house that needs more work in a better location. Price is important in what your overall cost is going to be. It always costs more than you initially think. Even as a contractor, I'm always surprised at what I actually spend versus what I thought (I) would.
Q: What are the kinds of things that immediately add to the price that you might not have counted on?
A: Labor is a huge component, and lack of expertise can also cause a huge problem if you try to tackle something you are not capable of handling yourself. When you get into a structural repair, most people would be better off avoiding property that is not structurally sound. Usually, the repairs are quite expensive and need to be done by an expert. The second thing is that even if you buy a property for cash, if it's structurally unsound, banks will not finance the property. You have to consider that when you are spending money ... until you get it back up to what is considered 100-percent repaired. If you were to try to sell the property, an inspector would have to put (a) stamp of approval on it before banks would allow someone to buy.
Q: What are some other things you look for when you evaluate property that needs fixing up?
A: When we buy property, just because of how much is available, I always look for something 1990 and newer and preferably 2000 and newer. Your heating and cooling systems, water heaters, appliances — all those things have a life span, If you go online, you can see the type of stuff and what the average life expectancy is. Those are costs people are not thinking about when buying something older. They are pretty big costs when you have to replace those systems, especially if your budget is strained and you have a furnace or water heater go out.
Q: How do you discover potential problems ahead of time?
A: I would encourage anyone to hire a reputable home-inspection company before purchasing anything. Are you going to crawl under a house and inspect the plumbing and underflooring? Most people don't know what they are looking at even if they did go under there. I would encourage spending the $300 or whatever to do that.
Q: What kinds of "pluses" do you look for in investment properties or fixer-uppers?
A: Newer systems, whether they are heating, cooling and water heaters. I look at the electrical panel to see how big it is. If it's only a 100-amp panel and you do any kind of remodel, you have to spend money to upgrade to a 200-amp panel, and that's a pretty big deal. I look to see if the roof is newer and in good condition. If buying an older house, if the windows have been replaced already; that's a big plus.
Q: When you are evaluating the property, how much of the cost should be part of the remodel?
A: When I buy, my real-estate agent runs comparables for me. I'm asking whether I am buying under the market in that particular area, looking at five sales in the last year at houses at this level. Then I can spend whatever it is to get back to that level, and I haven't invested too much money. I'm looking at return on investment. Someone living in it may be able to afford to spend a little more because they are not worried about immediate return on investment or resale.
Q: How important are cosmetics?
A: Houses with a good floor plan are fairly easy to upgrade, so a good floor plan is important. My wife and I made an agreement: We won't buy anything we wouldn't live in ourselves. It's really safe to buy in a good area if there is a good floor plan. Doors, trims, paint, countertops, floor coverings — that is all pretty easy stuff to upgrade and change around if you want. Moving walls and stuff like that is really expensive.