When I received the inspection report for the third BRRRR property, all the red ink that highlighted the missing items turned my head and my palms sweated. I was just starting from this stage of investment and hadn’t really worked on many repairs beyond cosmetics and mechanical items. If you can make the numbers work, those repairs are a slam dunk victory.
However, my third BRRRR inspection report flagged major foundation repairs. My heart sank.
On paper, the asset was still working very well, even if I had to spend $ 40,000 to repair the foundation. But was I ready to take on such a challenge? What could go wrong?
If you’re dealing with foundation damage, you’re probably panicking. Believe me — I feel your pain. For both homeowners and real estate investors, foundation damage is one of the scariest things you’ll find. This damage can manifest itself in a variety of ways, from cracks in foundations to damage to concrete slabs to leaks in basement walls.
Here’s how to evaluate and address problems, regardless of the degree of damage to the foundation.
First: Signs of basic problems
You should always hire a structural engineer to evaluate all the properties whose foundations are suspected, but there are some simple, uneducated, bare-looking clues.
- Plumbing problems: Leaky pipes do not necessarily indicate a fundamental problem, do Always indicate that further investigation is needed. Dripping water can damage the concrete over time.
- Poor drainage: If the ground is sloping towards the house (also known as negative drainage), water can collect.Remember: water and foundations everytime Bad news. For example, if one part of the property is in loosely moist soil and another part is in compressed clay soil, a difference in movement can occur. At that time, a part of the foundation shifts in the opposite direction and cracks occur.
- wood: Be careful if there are trees near the property. The roots of the tree may push the foundation or dry the soil, causing the foundation to shift.
- Hairline crack: These are especially common when appearing in mortar between bricks and concrete blocks, but can be a sign of foundation problems. These can also be caused by seasonal expansions (especially around window frames and doorways), but make sure a structural engineer evaluates the scene.
Know what you are willing to handle
When you dive into real estate, you have to understand what problem you are trying to deal with and what problem you need to move away from. This list is subject to change depending on the investment stage. Most first-time homebuyers will want to skip properties with a Foundation warning sign. However, the flippers of veterans who have won serious deals are not a big deal and may wipe them out.
Technically, anyone can do anything. However, all investors will eventually find the sweetspot problem they want to solve and the skin-crawling problem. In addition to foundation damage, other expensive obstacles include:
- Electrical damage
- Termite damage
- Extensive mold damage
- Fire damage
- Flood damage
Your list may grow as you encounter more problems during your real estate journey. Personally, I’ve added a raccoon epidemic and trees that break through the second story.
Still, keep in mind that adhering to the “No” list can hinder your investment’s success. Sometimes making a transaction so smoky is the fact that there is a huge problem to be solved in the transaction. Think of financial distress, owner distress, or property distress. A transaction where all three pains exist? This may be a home run … if you’re going to challenge.
With that terrible test report, I will return to my third BRRRR. In this case, I had all three: Detected property and the basis of cave exploration that the family couldn’t afford to repair.
Informed decision making
So how do you know when to suffer the great pain of repairing a foundation?
Hire a structural engineer
When buying a home, hiring a structural engineer during the due diligence stage can be very helpful. (Yes, in addition to your home inspector, you can identify potential signs of damage to the foundation, but you cannot always interpret the reason. why.. )
Even if you’re dealing with existing real estate, don’t skip their expertise. They examine the structural parts of the house to determine the extent of the problem. It will then help you decide whether to continue, create a report, and create a suggested action plan.
Skipping this step is fascinating, but structural engineers always pay enough to deal with foundation damage. You’ll pay about $ 200 to figure out exactly what’s going on.
For example, an engineer may tell you that corrective action is minimal. The foundation repair company may try to market you with unnecessary services. One of those companies told the owner that a major repair was needed, so I got a $ 50,000 discount on my offer … but the property is $ 1,000 for downspout and grading work. I only needed it.
Ask the engineer if this is a problem and see if a simple repair can fix it. Or do you have to expect to address future issues? Some water table problems can be mitigated with drainage pumps. But perhaps you are dealing with an ongoing changing soil beyond your control. Ask the engineer, “What is the fix?”
Interviews with Foundation crew
Talk to the crew of various foundations. Ask the property to visit the property, assess the reported damage, and provide a quote for repair costs.
Do you have a reliable Foundation crew? no problem. Most people don’t! Ask another investor or your realtor for the best foundation repair crew in your area. And prepare your budget too. It’s not time to get cheaper!
Make sure you and your crew are clear on your timeline to fix the problem, especially if you are planning a flip. Before doing any other work at home, you first need to modify the foundation. (If the contractor says something else, do it!) The basic fix can take days or weeks to resolve, so incorporate this into your overall refurbishment timeline. ..
Check the foundation company of your choice before signing the contract. Evaluate their work on other projects, ask about warranty claim performance, and talk to your referrer. If the company does not make a referral, this is a red flag. This is what you should ask:
- What is their warranty process? The warranty makes everything feel warm and blurry. Recall the scene of Tommy Boy and brake pads. They are also a great sign that the company supports their work. What happens to the warranty if the company is acquired or collapsed? It may invalidate your warranty overnight.
- Can I see engineering reports and repair quotes? Please review both of these reports before making a purchase. I’ve seen investors “guess” with their realtors or contractors … and very, very off.
Establish a budget
Add reserves to your entire construction budget in case of contingency. Most experts recommend a 10% reserve, but we recommend adding more to this budget, especially if it is one of the first investment transactions.
Finally, make sure your number still works! Now that you know the cost of repairing the foundation (including its contingencies), rerun the analysis. Does the transaction still work? Has the rate of return on investment changed? Make sure you are still happy with the numbers.
If you solve the basics correctly, the value of the property will increase. In some cases, the new foundation means that you can add living space to the basement to make it more attractive for rent or inside out. Incorrectly repairing the foundation can cause property suffering and future headaches.
Foundation damage was once a problem I ran. Now I have bought some homes with various problems that require work from $ 1,000 to $ 40,000. And fixing small basic issues ($ 1,000 to $ 10,000) is my sweet spot.
More importantly, I flipped these homes and sold them because the work was done correctly without any problems or impact on the value of the property.
But I certainly don’t buy all the assets that have the foundational damage I’ve encountered.Please be sure to check all Of the above points.
Farewell Pro Tips for Investors: If you need to try to repair a foundation, you can partner with the right foundation company to create a hot source for off-market trading leads.
As an investor, what do you do if you have a fundamental problem with your potential real estate?
Share in the comments below!