Mark Ferguson, the owner and president of InvestFourMore, has flipped over 125 houses, sold over 1,000 houses as an agent, and published six books. We had a chance to talk with Mark about what he looks for when buying a property, what home improvements he is willing and unwilling to make, and what types of issues can severely impact a home – including water damage.
Tell us a bit about yourself. Why are you so passionate about working in real estate?
I love real estate because of the freedom it provides. It is also a ton of fun. I have set up my business so that I can do all the things I enjoy, while delegating the things I do not like to others on my team. I like to say I am addicted to buying houses. I also love cars and love to drive. So having a job where I drive around looking at houses is a pretty sweet gig for me.
What types of homes, floor plans, or amenities are especially hot right now in the residential real estate market?
I think the same things that have always been popular are still popular for the most part. People want houses that are well maintained, look nice, have enough space, and are affordable. I think because the real estate market is so hot, many people are not picky about what a home has or does not have, but just want to find something that works.
In a perfect world, I think there are some things that people love to see in homes. Hardwood floors are a bonus today where 20 years ago people covered them all up with carpet! I think people also want to be close to work and be a part of a community. Again, housing prices can make that tough depending on where you are located. When I flip houses, I do not usually add any special features to sell a home because people are more concerned with price than special features.
Could you tell us what types of home improvements you don’t mind making to a property that you’ve acquired and hope to flip?
On most of my flips, we spend the most money on the kitchens and baths. Updated kitchens make a huge difference in the feel and functionality of a home. Kitchen remodels can also be affordable. We can gut a kitchen and replace everything for less than $10,000 (including labor). We don’t use high-end materials, but you do not have to in most homes. I see the television shows where people spend $50,000 to remodel a kitchen, and I get frustrated for the homeowners because I know they will never get that money back.
Bathrooms are also a big selling point, but again do not need to cost more than $3,000 to $5,000 to remodel. We always paint the interior of our houses and put in new flooring as well. Even though people love hardwood, that does not mean it makes sense to install it. We will refinish hardwood floors, but installing new hardwood usually does not make financial sense because of the cost. Of course, we make sure the roof, electric, plumbing, HVAC, and other mechanical components are working or new. The things that do not bring the ROI are additions (at least in my market), extensive landscaping, and high-end materials.
Since the rule of thumb is to budget 20% more than you think a home renovation or remodeling project will cost, are there any situations where you would want to set aside more money than that?
Usually, the 20 percent rule accounts for that because the more expensive a remodel is, the more money you will have set aside. If you are remodeling older homes or homes in areas you have not bought in before, you may need to set more money aside. Older homes often have more issues, and dealing with different towns or counties can bring new challenges as well.
Under what circumstances would you purchase an ugly and/or uninhabitable home for the purposes of flipping it in the future?
I love ugly houses! I feel like the uglier a house is, the better deal I can get on it.
There is a big difference between ugly and uninhabitable. I think too many people are scared away by ugly houses without even running the numbers. I make decisions on the facts: what a home will sell for, what the repairs will cost, and how much the other costs will be. If I get caught up in the emotions, I make bad decisions. If a home has severe problems with the foundation, the location, water, or something else that I cannot fix, I usually stay away. If I can fix an issue, I can add value and sell a home; if I cannot fix an issue like railroad tracks in the backyard, it may not matter how nice the home is – it will not sell.
When viewing a property from the outside, are you able to predict the likelihood of leaks or water damage just by observing its roof, gutters, and/or drainage patterns?
You can often see problems, but not always. I never assume a home is in great shape if I cannot see the interior. There are some signs that will show water damage, but not always. If the signs are there that there could be damage, you have to assume there is. If there are no signs of damage, you still assume there will be repairs needed on the interior.
Finish this sentence: “The most annoying case of leakage or water damage that I’ve ever seen in a property is…”
… in a house I have for sale now. We had four separate, unrelated water issues in the house. The grading was not correct and caused water to seep through the foundation. There was a broken water pipe on one side of the basement that caused a slow leak. There was another break on the other side of the basement that was found weeks later. We had a massive rainstorm that caused the gutters to overflow into a window well, which flooded the basement. Of course, none of these issues happened at the same time and they kept delaying the project.
We have also had to replace foundation walls because of neighbors’ yards draining right into our property.
Finally, could you give us some simple tips for homeowners on how to maintain the integrity of their roofs and drainage systems?
The first thing is to always have gutters. Many people try to save money by not having gutters, and that is the biggest cause of problems. The second thing is to make sure the grade around your house sends water away from the foundation. Finally, make sure the roof has been inspected in the last five years for damage (assuming there is no visible damage or leaks). If your roof has curling shingles or any missing shingles, get it inspected ASAP. During a rainstorm or snowmelt, see where the water is running and make sure it is not pooling anywhere close to the home.
Clogged gutters can cause water damage problems as well. To prevent this from happening, consider putting some gutter guards on your home.