15 Mistakes New Investors make on Fixer Uppers.

Thinking about renovating an old house? Let’s look at this fixer upper and analyze some noob-vs-pro misconceptions when it comes to fixing it up & investing into it. Then, let’s see if this house is worth the investment: Can we flip it? Can we wholesale it? What would the profit, the ROI be? Learn the real ways of making money with real estate & psychology – use code [WedgeLife] for **29% OFF**

What’s up everybody kevin here coming to you at the site of the 2-bedroom 1-bath potential flip house i’m excited to see inside let’s take a look together this one should be pretty fun it is 718 square feet and it is literally a two-bedroom one-bath and from the looks of the outside of it it’s never been fumigated so this should be pretty interesting given that it

Was built in 1925 it’s gonna take a peek of this let’s analyze this house new bruce pro style first things first you’re going to see a lot of this kind of cracking happening by the outside sort of retaining walls for this patio and around the property and a new light look at this and say oh my gosh the foundation is screwed but this is actually poured independent

Of the foundation these are not related so this is really a separate issue and not one with this amount of linear footage not too worried about now a noob would be concerned that there is a car repair / used car dealership next door and a pro would be – a duplex and sees brick wall and wood paneling a pro sees four by eight sheets of paneling a newb says the square

Footage is too small a pro says not true in this area a 680 to 750 square foot house yeah it’s small but it’s not abnormal for the area here a noob walks into the kitchen that says what is that if there’s a hole of a ceiling a process that’s called a gravity lift to carry troops and supplies between the ship and there’s a gravity i mean it’s a gravity hole basically

Hot air from your stove rises and goes out of the hole best form of ventilation you could ask for 1925 meanwhile the real pro goes over here and says looks like termites are making their own exit strategy me as a real estate investor i like this property so far i don’t see anything scary about this property let’s keep looking it might look scary but i like this

Anoop says there are tops to tin cans on the wall a process those are whole patches a newb says the kitchen cabinets are original proses duh but did you see the galvanized plumbing they’ve got something to keep an eye out for is there any copper anywhere else or did they use hex because they know about galvanic corrosion is when you connect copper to galvanized

Iron without the proper separation you get galvanic corrosion a newb says there’s termite damage at the doors the pro says well duh that’s usually where termites go chewin is exterior surfaces that are easy to access a noob looks at the original flooring and says oh my gosh i have to replace all the flooring a pro says i can replace these slaps with other oak

Looks like there’s about a three millimeter wear layer before i hit the nails sounds like i got another sand or two inside of a good value of these floors a newb says there’s a stain a pro says this is a flat roof this corner needs to be reflashed or reroute and what is immediately a noob think of mold and what does a pro think don’t worry about the mold solve

The water issue first worry about any water damage and now a quick intermission by our sponsor meet kevin make sure to stay to the end to watch the numbers on this potential deal and if you haven’t yet seen the real estate investing course where we go live and analyze your deals privately on our private discord and private alive streams twice a week same for the

Agent course where we go live twice a week and if you’re going to the 10x growth conference and you don’t know about the 10x pregame i better see you there click the links down below big shout out to mf’er 90 for today for buying the course back when it was $200 and saying that it’s valued easily at a couple thousand dollars a new says there’s a after a process

It was only one bathroom to remodel a noob says what is this a process good they’re purposely staying away from copper smart owners more galley spray-painted wall that says shed life pro move so this actually also has side easement access see this gate here this means you can kind of share this alley here with the car dealership we’ll call them in case you’ve ever

Wondered what termite droppings look like it’s this right here and in case you’ve ever wondered what it does to wood is it just gonna eats the inside out but okay overall scope you walk in this is a very typical family room setup from midtown ventura you’ve got sort of your dining room here in the middle you’ve got the kitchen on the other end separated from the

Bedrooms there’s actually a really good separation for noise from family room two bedrooms obviously i mean it goes without saying that there are some things that need to be updated there are some things that might not be particularly legal but it seems like the intent was good square d breakers and that’s something that i look for when i look at properties like

This is i look for the intent and the fact that i see that you know okay sure should this cable be in conduit yes but really conduit rules are made so that you know if something’s falling or gets thrown or you know a sword gets unsheathed really fast that somebody doesn’t zap themselves but really there’s no difference between this being exposed like this or being

14-2 in conduit whatever right i look for intent because if people are intentionally malicious they don’t water the plants they don’t try to clean up the property they don’t care but when a family is selling a property when somebody has moved on it hasn’t been able to take care of it anymore then doesn’t necessarily make anybody a bad person because they’re selling

A place that needs work and there’s already an offer on this property so the best thing i can wish for them is multiple offers maybe i’ll be one of those offers i don’t know that i can be as aggressive as it might take two by this because i want to always be secure my margins and there are a lot of people flipping right now that are spending money on deals they

Really shouldn’t be getting into and they underestimate the cost there are a lot of things to consider overall though i like this house i cannot wait to see it redone and in the future when somebody does flip this and put this back on the market expect a video from me and we’ll talk now without fully going underneath the property obviously it’s very difficult for

Me to make judgments about the foundation these could all be settlement cracks after that aluminum windows were installed i’m not really seeing cracking around the original windows which is a good sign actually yeah no you know i’m not seeing i mean this could have been restock owed since then i mean part of me doubts that this was every stuccoed but i mean we have

A little bit of obviously plaster on the sides here but actually all of the windows have been replastered on the sides but i mean really i’m just seeing hairline cracks because if there was really an issue today this would have already reek wracked and so something interesting to know is that anytime you have termites you’ll see things like this like this one

Window that’s almost completely eaten up by termites and then you go over here and you go no termites and then you go over here and you go no termites and then you go past the rosebush over here and you go a couple trees but it’s just the interesting to know that when we think of termites we initially think oh my gosh the whole house is infested and they usually

Just localized to one area when we took a peek under the foundation i didn’t see anything scary it looked like knob-and-tube wiring had been replaced over all foundation looked pretty good and i haven’t seen any cracking along the exterior here’s another access let’s take a peek in here so all i could really see there was that they installed a floor furnace that

Is a furnace sort of underneath the the floorboards to heat the property these properties usually had wall heaters so that was probably an upgrade but it looks like about nineteen fifties upgrade which is that’s about 25 years newer than 1925 all right folks let’s do some numbers so we’ll put these out of screen here as we sort of go through them here are my numbers

So when i analyze a flip to see is there potential to make money on this deal my goal is to do conservative construction numbers oh to where maybe i won’t even spend money on certain things and i should be able to make at least 10 to 15% that is if this house is going to cost four hundred thousand dollars i really want to see a potential profit of somewhere around

Fifty thousand dollars to go through the effort of doing this that way if mistakes happen and i end up only making twenty or thirty thousand dollars it’s still worth the time energy effort and the money that went into it and there’s still a return of my money and a return on my money so let’s look at some dollars here in terms of the amounts that we can spend on

This property i’d probably start with spending about eight thousand dollars on drywall and nice soft clothes shaker-style ikea kitchen cabinets that i’d throw in a counter top nice quartz countertops sink we go in by the way into detail and exactly what types of materials i recommend in the real estate investing course and all the goodies in detail what colors to

Use what schemes are in what’s not in we’re to save money and so on and so forth but anyway throw in a countertop quartz a sink with a backsplash that’s call it three grand maybe even custom tile for the backsplash appliances twenty five hundred bucks plumbing overall i think it should be pretty good yeah we’ve got gal v but we’re not gonna rip out everything in

That house it’s not gonna make sense to go through repairing all that laughing plaster yeah we’ve got crawlspace access but i don’t even want to get involved in it i’m gonna put two thousand dollars there i’ll go five k for electrical because i want to splurge on light fixtures like ceiling fans maybe add some can lights very very good to add lighting to a property

The very high roi in my opinion bathroom there’s only one of them so we’ll throw nine grand into that that’s probably gonna be new tub shower we definitely want to have a tub in this property tile some probably nice custom tiling i’d probably spend a little bit more on the tiling especially if i was going to flip it if i was going to rent it i’d spent a fraction

As much as if i were to flip it paint inside and out because we have lead-based paint that’s peeling we’re probably going to need some oil-based primers we get a little bit of work to do i’m going to throw 10 grand inside out we got the sheds we got the fences that that might end up being a little bit low refinish the floors replace the damaged slats new baseboards

Window trim door trim that’s four and a half grand one and a half grand and two and a half grand hardware this would be like new knobs on cabinets or in bathrooms or hardware on doors and hinges that are pre-existing lock sets things like that 1,200 bucks door replacements 2500 bucks so it shouldn’t be replacing too many of the doors i’ll try to keep that to a

Minimum and use kind of what we have garage door throw a new one in thousand bucks i might be high it’s just a one car garage but that garage has other stuff going on anyway i haven’t even been inside of it so who knows we’re gonna be up against anyway then we’ve got a roof repair i’m thrown in five grand i probably would just try to reflash that corner i probably

Would not rear oof the whole thing unless it came up as a large issue during inspections just like i would probably delay doing sewer work until inspections thrown in about 6 grand for that term i’d probably fumigate it during inspections again 5 grand so i’m really throwing in a lot of worst-case things that i could probably negotiate down like a new furnace for

3 grand if i didn’t already say that and of course i always like to throw in an additional reserve of somewhere around 10% so in this case i chose 7,500 and that gives us of some fix up total on a 718 square-foot house already of 96 thousand four hundred dollars that’s insane now you can right now there’s an offer on the property the odds are you could probably

Pick it up for about four hundred and five thousand dollars let’s say you got it for 405 with your closing costs and your total fix-up and then of course you have holding costs which holding cost the number one thing we like to forget those are going to be things like your property taxes your interest expense your vacant home insurance i mean it’s a nightmare how

Quickly the expenses add up talk about this a lot again in detail in the course and we’ll be talking about a lot about analyzing these deals specifically in the course and analyzing your deals to keep that in mind okay so then we are going to be in basically a subtotal into this deal of $519,000 519 for and i like to do just quick break-even math notice that this

Isn’t like some crazy template i like to do these from scratch every single time because i really have to think about the property and look at all the pictures and then all of a sudden rather than just going down a checklist i’m actually looking going oh yeah yeah there’s that that’s right there’s that gravity hold we got to deal with there’s that extra sub panel

We got to deal with we got to demo that shed in the back there i mean there’s some things that i haven’t even made it on to here but i’ve got a nice reserve although i don’t want to say that too much because then the reserve goes fast but anyway we’ve got landscaping on here yeah landscaping demo dumps on here don’t know if i mentioned that yet but anyway divide

This by 0.94 to figure out where my break-even point is my breakeven is gonna be about 552 with a break-even around 552 on a flip and moving ready two bedroom one bath to the neighborhood 200 square foot larger not next to the car shop selling for 600 grand i do not see any potential profit in the steel owed honestly if i could get the steel for $350,000 i’d have

My 50 grand in profit and i’d be pretty comfortable so if i could get this even even maybe like 360 below i’d be comfortable flipping it and of course my goal would be to spend less than this 375 i’d be teetering like i’m not paying a dime more it’s just not gonna be worth it because i’d pretty much just be working for my commission since i’m representing myself

On the purchase and on the resale which on purchase that might be like 10 grand on resale that may be like you know 13 $14,000 that basically i’m saving we’re paying myself and then it’s like oh i just basically did that to do two deals right essentially that’s like 25 grand i mean fine that’s a nice worst-case scenario but that’s a backup you still didn’t work

To find it all and do it all so yeah there you have it so to me it’s a great deal below 350 it’s it’s a marginal deal below 375 anybody that’s paying more than that who is wanting to flip it is is making a mistake however if somebody were not going to flip it and they were going to buy this as a rental then they could take out the selling cost they wouldn’t have

To do as much fix-up they could probably be into this deal said and done fully remodeled and rent ready for somewhere around four hundred seventy five thousand dollars all in and they’d have a property that’s probably worth around five hundred fifty thousand dollars so they’d immediately have that seventy five thousand dollars of equity and they’d be able to turn

It into a rental now cash flow in terms of this size i’m going to leave that one up for a different video stay tuned folks thank you so much for watching this new verse pro expose on a potential flip

Transcribed from video
15 Mistakes New Investors make on Fixer Uppers. By Meet Kevin