Residential Investment Information from Colorado Appraisal Management, Inc:

Investing in residential property?
Protect yourself against illegal "flipping"

When you're considering investing in rehabilitated residential property, you're making a smart choice. Real estate values in some areas have been increasing at the same time that the demand for homes has climbed — an impressive combination.

Often, people and companies that sell rehabilitated real estate buy a dilapidated (neglected, in disrepair) property, put a lot of money and "sweat equity" into it to make it attractive to a buyer, and then reap the reward when the property is sold for a lot more than the original buyer paid for it. There's nothing wrong with this - on the contrary, it makes more housing available at a time when it's in demand. And as noted, it's often a good investment choice for the eventual buyer.

However, prior to investing in a rehabilitated property, you should obtain a professional appraisal, from an appraiser who has your interests in mind such as an appraiser from Colorado Appraisals. 

Normally an appraisal will need to be performed on behalf of the lender, by an appraiser working closely with sellers, brokers and agents. Too often as of late homes are "flipped" for considerably more than they were recently paid for without any substantial improvements to justify the higher price. You'd be the one left holding the bag — shouldn't you have someone on your side making sure your money is being invested wisely?

It's easy to protect yourself. Hire a professional appraiser to ensure the property has had the improvements put into it that justify the asking (or agreed upon) price. If you're buying more than one property at a time from the same buyer, it's even more important to have them appraised by a professional working for you, instead of another party to the transaction. There are cost effective ways to protect yourself in an investment into many properties. We perform "drive-by" appraisals, sanctioned by housing giant Fannie Mae, which can be more cost effective than a full appraisal with an interior inspection. When combined with the expertise of a licensed home inspector, you should be able to buy with confidence that everything is as represented by the seller.

It's smart to always have an inspection done before closing on a property - and it's equally important to obtain an opinion of value from an appraiser. A home inspector will tell you if everything that is present in the structure is functioning properly, what repairs may need to still be done, and whether there are any safety or soundness issues with the property. An appraiser can translate that into dollars. As rehabilitated, is the property worth what it's selling for? If something unexpected happened and you needed to sell the home right away, would you be able to recover your investment?

As an investor, you need and deserve to know. Protect your interests with the help of a professional appraiser - Colorado Appraisal Management can help.