Investor Story 40: An Investor Seeking 2-Story Homes from $250,000 to $300,000 Each
This was a new investor. He really liked two-story homes, as he thought they offer better value appreciation. On a dollars per square foot basis, this can be lower than $100 per square foot. He was seeking properties that could be improved. With two-story homes, there is often a second living room upstairs next to the stairways. This living room could be converted into an additional bedroom, a media room, or an office.
Two-story homes do have several pros and cons—let’s have a quick look into them:
- Price per square foot: You usually get better a price per square foot, as these homes are usually larger.
- Additional rooms for expansion or improvement: Such as converting to a fourth bedroom or a study area.
- Privacy: Two-story homes can have more privacy, and it’s popular for many families.
- Three-bathrooms: Sometimes they have two and a half or three bathrooms.
- HVACs: It is preferred two HVAC systems, as summer is hot in Texas. If the property just has one HVAC system, sometimes it can break down quicker. An alternative solution is to have two phase switches, to separate upstairs and downstairs.
- Location of hot water tank: Some two-story homes have hot water tanks in the attic area, which means it is almost located on the third floor. The attic area for a two-story house is very hot, and when they break, it will be very difficult to replace them.
- Master bedroom location: It seems many families prefer to have the master bedroom on the first floor. This is easier for access, especially for elderly tenants.
These are some examples of the two-story properties we had shown to our client at the time, and it should give you some idea of what you can buy in Dallas at different price ranges.
Investor Story 41: A Californian Investor’s First Four Properties in Dallas
About This Client:
This is a young family. They are in their early 30s, and they are very experienced real estate investors as their parents were already very active investors in California. “It’s in my blood,” she said. “My whole family was in property, starting from my grandparents, so we were taught about how to invest in properties since a very young age.”
She approached me after she read several articles on my blog. She mentioned that I was the only realtor who would provide a pros and cons analysis, and also the only realtor who was willing to travel long distances and with portfolio experience. I was really touched when she said that to me, as it meant a lot to me from a very experienced investor.
She only wanted properties in premium locations—she was after capital appreciation more than rental yield, so all her properties were in prime locations and in pretty good condition with little or no updates required.
Property 1: Arlington – Mansfield ISD
I bought a property for her in one of my favorite locations—Southwind Addition in Arlington. This was a four-bedroom property with one study, and we got it for $245,000. It was leased out at $2,000 per month. This was a spacious property. The previous owner was downsizing as her children had grown up, so there were three empty bedrooms. It was kept clean and the extra study was useful.
Property 2: Grand Prairie – Mansfield ISD
The second property was in Mira Lagos—she was fortunate to buy this property. Immediately after her offer was accepted, the seller received a much higher offer, and it was a cash offer. The seller was making the process difficult hoping my client would terminate the contract, so that she could sell at the higher price. It was quite a difficult negotiation as the seller was uncooperative. We could not negotiate any repairs or concessions as a result of the other offer, and the seller was reluctant to answer any questions.
Despite these challenges, we did close this property successfully, and we painted the walls to a more neutral color. We had tenants already looking in the area, so we were able to find a tenant for her very smoothly. This case was a good example where a seller could make your life difficult, so you have to be persistent.
Property 3: Allen – Plano ISD
There is a section I really like in Allen—it’s an area that borders Allen and Plano. That subdivision attends schools in Plano, and it is very close to many new commercial developments. Allen is a very good area in general, but this subdivision is more convenient and closer to employment centers, and it has nice community facilities, hence, it is a very popular area for homeowners.
This property was a very interesting one. Typically we look for properties that we could convert a second dining or living room into a fourth bedroom, but this was the complete opposite. It had four bedrooms before, and because of downsizing, the previous owner converted the fourth bedroom into a living room. She did this by reversing the closet and door. In other words, she moved the door to the hallway area, so the hallway became a closet, and she removed the French doors for the bedroom.
As the result, this property was sold as a three-bedroom property, and it failed to attract buyers who wanted to buy four-bedroom properties as this was not described. When I saw the property, it took a while for me to understand what was done, and I recommended this property to my client. She ended up paying a lower price for a four-bedroom property, and it was very easy to add doors back on and rebuild a closet for the fourth bedroom.
Property 4: Beautiful home in Little Elm
The final property was a beautiful house in Little Elm. It was a custom home, and it was immaculately updated inside with beautiful hardwood floors, updated kitchen with granite countertops, and the study had shelves. It also had a nice covered back porch for BBQ. This was really a beautiful home in one of the best subdivisions of Little Elm—it was also assigned to top schools in Frisco ISD.
This was also the most expensive home she bought, and the Little Elm / Frisco areas were not very strong rental areas, so even though the home was very beautiful, tenants did not want to pay much higher rent to lease a property. The rent achieved was lower than anticipated for this property, and it took longer to find a tenant for this property.
However, it was a beautiful home, and it had appreciated faster than the other three properties she purchased. I believe this property will continue to appreciate more due to its location and updates completed. We just hope the tenants will look after the property well.
The advantage in owning high quality homes is the quality of tenants. You get much better tenants—they will appreciate your property more, and you can also increase rent easier in these areas. These properties are all located in good subdivisions, and when it comes to resale, they are more likely to be sold to home buyers than investors.
Investor Story 42: An Investor Who Only Invests in High-End Properties
This is a case study from one of my Chinese investors. She only wanted to buy into high-end properties. She bought four properties from me, and it was a very effective strategy. She had achieved good capital appreciation across her portfolio.
Property 1: Richardson
Her first property was in the Richardson area. This was a nice three-bedroom, two-living room, two-dining room property in a prestigious subdivision of Richardson. The property was under $300,000, which was reasonably priced at the time. The initial strategy was to either lease out to a family who wanted to attend schools nearby or lease out to university students as it was also very close to the University of Texas, Dallas (UTD). UTD emphasized on recruiting international students, and many students wanted to rent in nearby homes as it would be much cheaper than boarding costs at UTD. This property had appreciated very quickly as this was a well-established neighborhood with very low inventory. The property was leased out to a family with kids attending nearby schools.
Property 2: Plano
Plano was also on this investor’s list. Plano was not a great market for rental yield, but it was a very well-known location for its schools, convenience, and concentration of Fortune 500 headquarters. My client picked a two-story property with four bedrooms, three living rooms, and three bathrooms. The third living room was the main feature of this property as it could be used as a media room, a study, or even a fifth bedroom as it had closets as well. Most of the properties in this area did not have this additional room, and most only had two or two and a half bathrooms only.
Property 3: A condo near SMU
Her third property was to invest into a condo near South Methodist University (SMU). There was a very strong demand from students renting condos in nearby apartments as dormitory costs are very high for SMU. Students usually would share a condo and this was usually shared by two to three students. This condo was selected as it was previously owned by a lawyer whose daughter just graduated from SMU’s prestigious law school. The condo was maintained very well, and it had three bedrooms. The design was very interesting—the three bedrooms actually spread out across two floors, and it was more like a townhome design. It also had two separate entrances on two floors, the upper room was accessible from the third floor, and it was used by the previous owner’s daughter exclusively. The idea was to separate her room from sub-tenants downstairs.
Another advantage was that it had three separate bathrooms, so tenants did not need to share bathrooms; it also had two living areas. It was quite a good design for students, as they were usually leased out on a room-by-room basis.
Property 4: A commercial property in Richardson
This was an interesting case. She wanted to diversify, and she decided to try a commercial property. This property was in the old Richardson area, which used to be the Old Town of Richardson—it was kind of in a historical district. This district was marked by the City of Richardson as part of the Revitalization Plan. The Plan would rezone, and they would also take down many old warehouses and turn them into modern apartments and retail shops. This was an opportunistic strategy as this was a standalone commercial building and was strategically located within the Revitalization Plan.
Commercial buildings are very different from residential properties. This one was empty for many months as commercial space would need to compete with new areas or newer buildings, and while this area was in the Revitalization Plan, it was not in the prime retail location for Richardson. Furthermore, sometimes it was harder to find tenants to occupy an entire commercial building—sometimes you need to subdivide space for multiple tenants.
Case Study 43: 13 Reasons Why Properties Don’t Get Leased Out
This is a collection of feedback from our team, our clients, and also other property managers. We all want to lease out our clients’ properties as soon as possible, but sometimes it will hit an obstacle. Sometimes it is a complete myth why it takes so long to lease them out, but there are common reasons why this happens.
Reason 1: Price
That’s an obvious reason if you are way overpriced without any justification. If you want to achieve a certain rental price, then your property needs to have more updates or a unique feature (such as new appliances or covered back porch). You need to have reasons why your property is worth more than others.
Reason 2: Competition
Some streets are full of rental properties. We were helping one client rent out her property—she bought a duplex on a street that had another 20 duplexes. Renters were walking from property to property to compare the properties, and there were hardly any difference between them.
Reason 3: Neighbors
This can be an issue sometimes. There once was a property in Fort Worth—the area was peaceful, but one day a new neighbor moved in. His driveway was full of garbage, and his backyard was full of old furniture. This was an issue for prospects—even though they liked the community, they would have to deal with an unpleasant neighbor.
Reason 4: Kitchen is too small
Some houses have tiny kitchens. We just went to a 2,100-square-foot house today. It has four bedrooms and a large study, but its kitchen size is the same size as a two-bedroom condo’s kitchen. This builder always built small kitchens without any pantry area, and always has just one or two processing areas. It is an issue for many tenants.
Reason 5: Low ceiling
We wrote an article on this topic. This is a frequent reason why a tenant doesn’t like a property, as they can touch the ceiling, and properties with low ceilings are always dark inside which means they must turn on lights even in the daytime.
Reason 6: No master shower area
This is another factor to consider. Some builders want to save money and make the master shower area as “optional.” Many tenants do not want to take a shower inside a bathtub, so if you have an area such as an extra space or closet or storage area (near where the master shower area would be), try to add a separate shower area as it can improve the property value.
Reason 7: Wobbly or shaky fence
Families with children will find this unsafe, especially if neighbors have big dogs. This is also a concern for families with pets, where pets can sneak into their neighbors’ properties. This is an easy fix. You should consider repairing the fence, and it’s best if you can stain the fence as it will make the whole area look very nice.
Reason 8: Too close to transmission towers
Many families do not want to live behind or next to transmission towers because of their fear of Electromagnetic Fields (EMFs). Properties that are located next to transmission towers tend to have issues when it comes to resale, and sometimes you have neighbors pointing their satellite TV dishes towards your home which can also be a negative factor.
Reason 9: A lot of standing water outside
Some properties have uneven elevation, and water tends to stand on certain low points. We showed a tenant to a nice property in Mesquite on a rainy day, and the water was pouring out the front. We had to jump across the water to get to the front door, and we found wires were all inside the water. The prospect did not want to rent the property as he was scared that water would backflow into the front door.
Reason 10: Smells / Odors
Many landlords forget that humans have five senses, and smell is a very critical point. Smell is a major turnoff factor for tenants. Common odors are cat smell, cat food smell, dog smell, wet carpet smell, moldy/humidity smell, and even food smell. When you are leasing out your property, you have to pay attention to these factors—try deep cleaning property with citrus-scented detergent, and try air duct cleaning as a lot of smells are from air ducts. You may even find dead animals inside the attic or air ducts.
Reason 11: Bugs
This is a scary thing for many—and I have seen an equal number of men and women who fear bugs. I had a tenant in Mansfield whose son was allergic to wasp stings. He was a big guy, and he was screaming when we were showing the property as he saw a wasp flying around. Many ladies also find cockroaches scary, and spider webs. I always recommend that my clients do a full pest control sweep before tenants move in and do a final clean up two or three days after the pest control sweep to clean as many dead bugs will be found inside the house. Wasps should not be taken lightly as they are very aggressive, and they attack kids. If there are wasps found around or inside the property, you should contact the pest control company right away, as it may become a liability issue if an occupant is stung.
Reason 12: Missing or broken lightbulbs
I have seen in two cases where the seller had taken all the lightbulbs from the property or replaced them with cheap lightbulbs. Little details like this can hurt the showing as it almost shows that the landlord is very stingy and not even willing to replace lightbulbs. Make sure you do turn on electricity, even when a property is vacant, as tenants do check on lights when they are looking at a property.
Reason 13: Dirty carpet / carpet stains
I have seen some owners who are very critical about carpet condition. Sometimes they have family members who are allergic to carpets, and some are allergic to animal hairs on carpets. It is a common request to shampoo clean carpets, and around 60% of my clients prefer to replace carpets to laminate floors, which is much easier to maintain and look nicer. Another issue with carpets is that the under pads can become smelly over time.
Investor Story 44: I Only Invest in Brand New Homes – Investor from China
Here is an investor story from China. She is quite an active investor already in other states, and she contacted me after she read my articles online. Her strategy was just to invest in new developments. She knew she would be paying more in premiums, but she preferred to do it this way as she could save in maintenance cost.
Brand new constructions are usually priced around 20% to 30% higher than market price—basically you are paying the future price. One issue relating to new homes is the appraisal value—we found banks usually provide lower value on new homes, so when it comes to refinancing, you may get less than what you expect.
With new homes, you can also achieve higher rent initially—we call it a “honeymoon period” for new homes, and in our experience, we can achieve $100 to $200 more in rent for brand new homes, but then it’s hard to raise the rent after the second year, and sometimes you need to drop the rent to match with market rent as it is not a new home anymore.
First Property: We bought a new home for her in Mansfield. It was around $245,000 and was just one month old. I was able to lease it out at $2,000 per month. Similar homes in the area would rent out at $1,800, but they would cost around $210,000. I was lucky, and I leased the property out at $2,000 per month again in the second year, but it was harder to convince as this was a new home.
Second Property: I bought a new home for this client in Little Elm, which was assigned to award winning schools in the Frisco ISD. This was a nice four-bedroom property, and she paid around $300,000 for this nice property. The rent was $2,200 per month—this area was primarily for capital appreciation and not for rental. The appraisal came in around 10% less than purchase price, as nearby properties were sold for around $270,000. I signed a three-year lease for this client, so the rent could be maintained at the same level. Equivalent older homes were leased out at $1,900 to $2,000.
Third Property: I then bought a property for her in Wylie. It’s also an emerging area with new developments. Wylie is an interesting area. Wylie ISD is a very nice school district. Wylie borders Garland, Plano, and Sachese, with connection to George Bush Turnpike and also within short distance to Firewheel Mall. On the west side of Wylie, it connects to Plano, and it is a popular area for new families moving to Dallas as well.
This property was a brand-new home in Wylie, and my client paid around $220,000. It was a smaller home, and tenant is paying $1,600 per month at the moment. It was in a newer subdivision with various community amenities. One part of this community is also a golf course community, but you have to have a membership for that. The rent was comparable to other properties in the area, but it was just a three-bedroom property and it was the smallest home on the street.
Fourth Property: She is buying her fourth property, and it will be in the Mansfield area. There are some nice developments there, and they are priced around $300,000. She is likely to get around $2,500 rent in this new development when it’s finished.
New homes have an advantage that builders do have a warranty, so they do take care of maintenance during first 12 months, and sometimes this can extend to 24 months. Investors need to compare pros and cons when buying a new brand-new home. Most of my investors tend to mix one or two brand new developments into their portfolio and not buy them exclusively. However, if you are just buying one property or if you are buying your own home, then you can consider a new development as an option.
Investor Story 45: An Investor Who Bought 10 Cheap Properties
Here is an investor story for those who just want to grab old and cheap homes. The maintenance costs can really be a huge issue. This client finally listened to my advice, and he moved his investment focus to Dallas.
Question: Prior to buying in Dallas, where have you invested?
Answer: We were buying in cheap towns in Ohio and Indiana, as rental yield was supposed to be higher, so we bought a bunch of properties that were priced between $10,000 and $30,000. The rent was supposed to be $500 to $600 per month for each property.
Question: What were the issues?
Answer: The biggest issue was the tenants—cheap properties can attract cheap tenants, and some of our properties had three or four tenant turnovers in 12 months. Initially, we blamed the property management, but then we figured out it was really the wrong property to invest in.
Also, maintenance was a huge issue as poor tenants typically do not look after their properties very well. They don’t care about the property, and they usually make a huge mess when they leave the property. As the rent is so low, you can only get a small security deposit, and they don’t even cover maintenance costs.
Question: What about reselling?
Answer: That is also a problem. Cheap homes do not attract home buyers, and as the price is so low, bank lenders are not interested in these types of properties. In return they end up selling to buyers looking for cheap deals, since there were hardly any home buyers interested in these properties. These properties are considered to be speculative investments—they are just like penny stocks in the stock market.
Question: What do you think is a good strategy for these types of cheap properties?
Answer: I think you can still buy cheap properties, but in a fast growing population area like Dallas there is still justification as there is a shortage of housing in Dallas. However, cheap properties should only form a small percentage of your portfolio. They tend to generate the least return, so you need to make up for your loss from rental income.
With these properties, you can get your capital back if you have good three-year rentals, but in our experience—and we have experience with 10 properties in this category—not even one of them was able to achieve steady rental. We had so many issues collecting rent that, on average, we had to file one eviction per month. These are really low quality tenants.
In 2016, we decided to cut our losses, and we sold all of these cheap homes. We did not make money on any of the properties. We then moved our focus to the Dallas area and bought three properties, as it is also easier to manage with just three properties.
Maintenance costs for cheap properties are the same as for expensive homes—the cost to replace a toilet is the same. If you replace a hot water tank, which would be $1,500 to $1,800, then you essentially lose three months of rent for these cheap homes. It’s just not worth the time and effort to keep these properties as no matter how much effort you put in, you are still getting bad quality tenants.
It’s about quality, not quantity. I would rather have one well performing home that can appreciate and also have the ability to increase rent than have 10 cheap properties.
Investor Story 46: Investor Story of a B&B Investor
Client Type: A client building up his portfolio for B&B
About This Client:
This is one of my first clients that was buying properties in the Dallas-Fort Worth area to expand his B&B business. It was a successful business for him, and he was already an experienced B&B operator in California. Here is a list of what he had mentioned to us. He used AirBnB and VRBO to advertise for his B&B properties.
He bought properties near Highland Parks (North Dallas) near SMU, as well as in Plano and Frisco. He then expanded into areas near the airport. He also owned properties in Garland and Richardson.
The property near SMU was the most popular one. He thought it would be mostly leased out to college students, but it turned out to be completely different. There were several hospitals near SMU, and his condo was very popular amongst medical professionals and also to family members visiting patients as they did not want to stay in a hotel for a long period of time. With a B&B, they needed to be careful with the HOA, as many HOAs do not like B&B properties. They had to make sure their guests did not party at night or disturb other occupants.
The property in Plano was in a totally different market, and it was leased out to many local families—either they had visitors coming to Dallas, or they were waiting for their new homes or renovations to be completed. The latter was the most popular case as many families would lease for one or two months until their new home was ready.
The property in Frisco had similar characteristics as the ones in Plano. There were also many business guests who preferred to stay in a B&B. With many headquarters based in the Frisco and Plano areas, they would travel to Dallas for training or maybe through relocation. In the case of relocation or transfer, employers would lease these properties for two to three months until their employees found a permanent location to stay.
The Richardson and Garland properties are slightly different as they are closer to the University of Texas, Dallas. They do see students renting room by room on a six-month basis, or they would lease during the summer time before college starting date. You get higher rent when you lease out on a per-room basis, but you will also get a higher tenant turnover rate.
With a B&B, location is very important—they need to be in a convenient location, preferably within walking distance to nearby shopping areas or public transportation as many guests do not have cars. Cleanliness and presentation are also important factors—B&B guests do leave feedback all the time, and one negative remark will tarnish your reputation significantly.
HOAs and neighbors are major issues for B&B operators, and many operators avoid properties with strict HOA rules. Some neighbors do not like B&Bs as they feel they are affecting the neighborhood. The worst case scenario is to have guests who throw parties at night and draw complaints from neighbors.
It is a good business as you can achieve strong cash flow, but you also need to spend significant capital upfront, as you need to renovate the property and also purchase all the furniture for your guests. On a good month, a daily rate can be charged of $150 to $200 per night, which is highly acceptable to guests as they get to stay in an entire house with three or four bedrooms. That is an excellent value compared to staying at a hotel.
Case Study 47: Ceiling Height is Very Important to Consider
This is an interesting case study. This is for you to think about if you find properties with lower ceilings. We encountered this issue several times in 2017. As I am not a tall guy, in fact, I am shorter than average height for sure, it is an easy point to miss if you are not a tall person.
There is just one reason why developers build some houses with low ceiling heights—they want to save money, and this can cause problems when you try to rent them out.
- Lower ceiling height create an oppressed feeling—you feel crushed. This is because it will make the whole property darker.
- Lower ceiling with popcorn ceilings tend to make this feeling even worse.
- I also see many builders wanting to save money and only have one side window on the side for the living room, which means you must turn on lights even in daytime.
- Occupants will walk into lights all the time, which is a problem even for me. Imagine your tenant is six feet tall—he will walk into the dining room light all the time.
I had a tenant and he said, “I can touch the ceiling, and when my son jumps around, he will bump his head on the ceiling.” It sounds funny, but that’s the reason why they did not want to rent the property.
If you already own a property with low ceiling height, here are several ways for you to improve it:
- Add more windows. See if you can add more windows to allow more lights into the room—this can make a major difference to how you feel in the house.
- Change lights to pot lights so that you are less likely to bump into them. It also makes the ceiling appear to be higher.
- Skylights are a very good idea, but you will need a vaulted ceiling to do that.
- Remove the popcorn ceiling, smooth them out, and repaint them with a bright, white color to make the room brighter.
- Repainting the walls to a brighter color will also help.
You cannot avoid the fact that there are many tall people, and you never know what your tenants will think, so check on the ceiling height next time you are in a property, and imagine if you are six feet or taller—would you feel it is too low? Ideally, you want to find a property that has a 7 to 10 foot tall vaulted ceiling. A window above the front door is another feature you should look for as it will make the room feel bigger and brighter.
Case Study 48: Termites & Pest Control
I wrote this on December 29th as my client just terminated a property purchase in Allen. I will use this as a case study to demonstrate issues with termites. In this case, the property was a nice four-bedroom property—it needed some updates, but nothing significant, and the Allen area was a very difficult area to buy a property, so my client was very excited that they were able to buy this property.
During the inspection, the inspector noticed small holes in the master bathroom, and it was in the area between the bathtub and shower, and this brought his immediate attention. Termites are very difficult to detect, and they are inactive during winter time, so it is extra difficult to detect when it is cold outside (and on this day, it was -2°C in Dallas).
Termite signs can be obvious or hidden—let’s discuss some of the common signs:
- Rotten wood or rotten door: Look at the doors to the exterior (back door, front door, side door) and trims and look to see if they have been chewed up or eaten by termites. It may look like holes or rotten wood.
- Check on the fence. You can see them walking around sometimes. Look for signs of rotten wood or signs.
- Check on the siding of the chimney. They do go up the roof. A lot of times this is caused by overhanging trees, which they will climb up and then walk along the roof, looking for a food source.
- Bathtub and shower area: Subterranean termites will live underneath the house, and then they will look for areas to go out. The wall between the shower and bathtub is usually a soft area because of the moisture, so they will go out from this area by chewing a hole and then climbing out of the wall.
Subterranean termites are hard to detect as they are underneath the house, and as we do not have basements in Dallas, you cannot go underneath the house to find them. You can consider three options if you are suspicious about termite activities in your house:
- During inspection: You can request another termite inspection report. This will be a very detailed termite inspection report to determine location, type, and recommended treatment for termite activities.
- Request termite treatment right away. Sometimes my buyer would request termite treatment without inspection—they will just ask for the treatment to make sure it is done before they move in. Treatments usually come with a warranty, which can be 60 days to 12 months. You need to plan a treatment schedule carefully as it is hard to find them during cold months.
- Terminate the contract: As in the case of my client, there is no guarantee that termites will not come back to this property even after treatment. I told them if they still think about it every year even after treatment, then they should terminate the contract.
Case Study 49: How Do You Analyze Each Property for Your Investors?
As we buy a lot of properties for clients that do not even fly to Dallas to check them out, we believe it is essential to have a system in place to analyze each property independently.
Obviously, every property has unique points (good and bad), and these are factored in separately, but in summary, we look at the following main factors, and we then rate them 1 to 10.
Layout: Layout is a very important factor—we look for the following:
- How do you feel in the house? Is it very dark inside the house?
- Are there sufficient windows for lights?
- Is the kitchen too small?
- Is the property wasting too much space such as with very long corridors or a U-shaped layout?
- Is there any room for further growth such as converting into another bedroom?
- Shape of rooms: I have seen so many irregular rooms, and we have to assess rooms as if we lived there and how we would put furniture there. We have virtual tools that are useful to help us come up with simulations.
Neighborhood: This is a tricky one as everyone has different perspectives—sometimes clients do not care about the school district that much, and sometimes it is their top priority.
- How do you feel about neighborhood? What is your instinct?
- Do you feel the neighborhood is unsafe? A good sign is to see if there are lots of windows with grills or if the AC units have cages.
- Do you see a lot of garbage floating around on the street?
- Are there any people walking in the neighborhood that make you feel uncomfortable?
- Are the neighbors really messy people? Like hoarders, trash in the backyard, or unused cars everywhere?
Kitchen Area: Kitchen area makes a major impact for buyers and tenants—it can be the “deal breaker” many times. Some developers built ridiculous layouts on kitchens.
- Is the kitchen sufficient size compared to the property size? We have seen a tiny kitchen in a 3,000 square foot home.
- Are there sufficient cabinet spaces?
- Is there a pantry area?
- Is the stove in an odd location, such as blocking the fridge or on the wrong side of the kitchen?
- Are there more areas for improvement, such as adding an island in the middle of the kitchen or perhaps adding more shelves?
- Is the kitchen an irregular shaped kitchen?
Bathrooms: Another important factor—here are the areas we look at:
- Size of master bathroom: Some bathrooms are just so tiny that it is not practical. Bathroom is a major development cost, and many builders try to save money by building smaller bathrooms.
- Separate shower area in master bathroom: For smaller homes, townhomes, or condos, this is fine, but for larger homes, you should have a separate shower area in the master bathroom.
- Is there a room for a new shower area? Some developers build a closet area or just leave a blank space—if you have this, it is a good idea to add a new separate shower area.
- Flooring: Tiles are still the best, but we have seen many homes using carpet or wood for bathrooms, and they tend to deteriorate much faster.
- Door layout: Some bathrooms are poorly designed so that the door will slam into the shower glass all the time—this is a safety concern.
Previous Ownership: This is something most realtors don’t do. It is part of our analysis because it provides insight as to why the seller is selling and what has been done to the property:
- Homeowners: You should ask why they are selling their home. If they are buying a new home or in a new development, then they may have pressure to sell their home in a certain time, and this may be an opportunity for negotiation.
- Flippers: The renovation could be just quick renovations, and often not the best quality—these homes usually look good, but they do not replace big-ticket items.
- Rental property for a long time: This property had been a rental property for a long time—that means the seller has no knowledge about the property, and you should check on essential items such as roof, HVAC, water heater, pest control, and termite treatments.
- Estate sale: Make sure the title is clear and determine who should sign and if all of them have signed.
- Divorce: This is also a tricky one. They may need a fast sale, but the title may not be clear. Make sure they have paid all the fees such as HOA and tax.
Water Flow: Another area many realtors fail to observe.
- Look at water flow, and if possible, find a rainy day and see if water collects in specific corners or areas.
- Does the water backflow into the house if there is a negative elevation in the backyard?
- Do you see neighbors’ water flowing to your home?
- Are there drains which can direct water flowing out?
- Do you see specific areas that are very muddy? If so, that suggests water is sitting on those areas more often.
- Do you see areas where all the grass has died?
HVAC Systems: HVAC systems are two parts—air conditioning for cooling and furnace for heating. While everyone knows Dallas has hot summers, we do have cold winters here, and yes, we do get snow from time to time.
- If you are buying a two-story home, check if it has two systems, as it will be a better design.
- Check your evaporator coil and see if it is too dirty.
- Check your heating and if it is using gas or electricity. If using gas, check if there are leaks.
- Check on the age of the system. Many owners do not replace the outside unit and inside unit together, so they may have a newer system outside but still the original system inside.
- Check on the hot water tank location. Typically they are located either in the garage, hallway, or up in the attic. Each location has advantages and disadvantages, and I generally prefer them to be in garage so if it leaks, water will flow out of the garage instead of damaging floors or the ceiling.
Trees and Bushes: Another area that most realtors have overlooked.
- Any big trees in the yards?
- Any signs that they had big trees in the past?
- Do you see a lot of roots near flower beds or around the house?
- Trees with overhanging branches on the roof?
If you see signs of tree roots, it is best to check the sewer line by sending an underground camera to get a visual.
What can be improved? We are also very different, as we rate each property in terms of potential to add value.
- Are there any cosmetic updates we can do such as painting or adding new appliances that can add value to the property?
- Anything we can do to improve value such as adding a covered back porch?
- Anything we can change with the layout to add value like making the kitchen bigger, converting a room into a fourth bedroom, or adding a closet to a study to make it into a fourth bedroom?
- Anything we can do to add more features to bathrooms?