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What repairs give the greatest return on a flipped property? Episode #292

Todd: Hello. Welcome to Todd Miller TV joined here today with Mark Gonzales, local Las Vegas appraiser. Welcome to the show.

Mark: Thanks Todd.

Todd: OK. Flipping is huge in Vegas.

Mark: Yes.

Todd: We’re going to talk a little bit about that. An investor buys a property. They want to fix it up and flip it. OK?

Mark: OK.

Todd: How do you as an appraiser deal with the – you could see that they bought either through the MLS or trustee say at a little lower price. And then two or three months later, they’re selling it for a higher price. How do you make that adjustment? How do you make that leap to say, “It’s now worth more.”?

Mark: Generally, what they’ll do is they’ll take these properties and they’ll flip them, they’ll take a property that needs some maintenance and some repairs and they’ll do those repairs and maintenance. Then they’ll bring it up to what’s standard in the area, maybe even a little bit nicer.

Todd: OK.

Mark: And we take those factors into account.

Todd: Have they ever handed you a copy of their paperwork saying, “This shows all the things we did to the house.”?

Mark: Yes. And we look at that and obviously, we take that into account and we tend to look for properties with similar upgrades in the area.

Todd: OK. What things tend to be really good like they all like to do to improve the value of a house?

Mark: The best thing you can do is just maintenance.

Todd: OK.

Mark: Properly maintain your house, making sure the yard is maintained. Make sure there’s no broken windows, things like this. The AC works. The heater works.

Todd: OK. What about paint and carpet? Those are – make sure your carpet is nice and paint is decent.

Mark: Yes. Some of the basic things like this will help out too.

Todd: OK. What about somebody who says, “Hey, I want to add a swimming pool to the back of the house to improve the value,” what do you think about that as an appraiser?

Mark: Generally, that’s not a good investment because you could spend upwards $20,000 or more putting in a pool. And for the average home, maybe $10,000 to $15,000 in return.

Mark: All right. So, let’s look at the other side of the situation. It’s not a flipper. It’s an owner occupant who’s going to buy it but they’re getting a renovation loan. So the house actually doesn’t look really nice. It’s actually kind of trashed a little bit.

Mark: OK.

Todd: They’re trying to bring it up to community standards and they’ve got to get a loan to show that value. How do you do that knowing that when you walk in the house, it doesn’t look great? How do they – how is that appraisal work?

Mark: Well, they’ll send over the invoice and we’ll go out and inspect it and we will do what’s called a subject two appraisal.

Todd: OK, subject two appraisal.

Mark: Right. Meaning, once the repairs are done, we’ll come back out and do a final inspection, verify everything is done and that’s how we determine the value.

Todd: OK.

Mark: Based off those repairs.

Todd: Do you go back out to the house again after the repairs have been done to sort of …

Mark: Yes, that’s the final inspection that I was talking about.

Todd: Do you do in-term inspection or is it just the final?

Mark: It’s just the final inspection.

Todd: So you just go back and go, “Yup, they did all the things that they said they were going to do,” and it’s stamped, it’s …

Mark: Right. We take photographs of it and send that to the lender.

Todd: OK. If somebody wants to hire you either to do an appraisal or do whatever, how do they get in touch with you?

Mark: OK. You can reach me at 702-278-8840 and they can reach me in seven days a week.

Todd: Awesome. Thanks for coming on.

Mark: Thank you Todd.

Todd: So Mark Gonzales, appraiser extraordinaire here in Las Vegas. That’s my update for today and hope to see you on another video. Thanks.