What Morongo Basin Investors Should Look For in an Investment

You found it.

A Morongo Basin house priced far below everything else you've been looking at.

It needs work, but that's exactly what you wanted.

The kitchen is ugly.

The flooring is ancient.

The bathroom hasn't been updated in decades.

There's junk in the yard.

Perfect.

You can already picture the transformation — and the profit.

But before you start choosing flooring and calculating your future selling price, there's a much more important question:

Why is the house cheap?

Sometimes a cheap house is an opportunity.

Sometimes it's cheap because the property has problems that will consume your renovation budget, reduce your future buyer pool or make the finished property harder to sell.

A low purchase price doesn't automatically make a property a good deal.

Especially in the Morongo Basin.

Ugly Can Be Good

Let's start with the fun stuff.

A cosmetically ugly property can make an excellent investment.

Dated paint?

Fixable.

Old flooring?

Fixable.

Ugly light fixtures?

Fixable.

Outdated cabinets?

Potentially fixable.

Overgrown landscaping and a yard full of debris?

Usually fixable.

These are the kinds of problems many investors want.

They scare away some owner-occupant buyers without necessarily changing the fundamental desirability of the property.

The investor improves the house and creates something a larger pool of buyers wants.

That's the basic idea behind a flip.

The problem begins when an investor confuses ugly with cheap for a reason.

Those are not necessarily the same thing.

Before You Buy, Separate the Problems Into Two Categories

When evaluating a potential Morongo Basin flip, I like thinking about problems this way:

Problems You Can Fix

These might include:

• Paint
• Flooring
• Fixtures
• Appliances
• Cabinets
• Countertops
• Landscaping
• Cosmetic damage
• Deferred maintenance
• Some plumbing or electrical repairs

Then there are:

Problems You May Have to Sell

These can include:

• Location
• Difficult road access
• Flood-zone designation
• Awkward lot configuration
• Surrounding properties
• Certain floor-plan limitations
• Lack of practical parking
• A difficult bedroom/bathroom configuration
• Distance from services
• Other characteristics that can't reasonably be changed

And then there's a third category that can really hurt an investor:

Problems You Can Fix — But at a Much Higher Price Than You Expected

That's where some of the biggest Morongo Basin landmines live.

That Septic System Could Change Your Entire Budget

Many Morongo Basin properties are served by septic systems.

An investor may walk through a distressed house thinking about flooring, paint and kitchen cabinets while barely considering what's underground.

That's a mistake.

If the existing septic system has significant problems or needs substantial repair or replacement, you could be dealing with an expense you never included in your original renovation budget.

And unlike a beautiful kitchen, spending money on a septic system doesn't necessarily create the kind of visible transformation that makes a buyer walk through the door and say:

“Wow! I'll pay $30,000 more!”

It may simply be money you needed to spend to make the property functional and marketable.

That's a very different return on investment.

Before purchasing a property, understand what you're dealing with and use appropriate inspections and qualified professionals when necessary.

Hidden Plumbing Problems Can Be Expensive

Old desert houses can have old plumbing.

And plumbing problems don't always announce themselves during a quick walkthrough.

A faucet works.

The toilet flushes.

Everything seems fine.

But what's happening inside the walls, beneath the slab, under the house or between the house and septic system?

A significant plumbing problem can turn your tidy renovation budget into something very different.

That's why investors should be careful about assuming:

“It just needs cosmetic work.”

Sometimes cosmetic work is simply the part you can see.

Water Is a Big Deal in the Desert

It sounds almost contradictory, but water-related issues matter enormously in desert real estate.

Where does the property's water come from?

Is there a public water connection?

Is there a water meter?

Is the property dependent on another water source?

Are there problems with existing plumbing or supply?

Don't make assumptions based solely on the fact that there's a house sitting on the property.

Verify.

A beautiful five-acre parcel with an inexpensive house isn't necessarily a bargain if getting the property's basic systems functioning properly turns into a major project.

Flood Zones Matter

Here's another issue investors can underestimate:

Flood zones.

It hasn't rained in weeks.

The ground is dry.

The house looks perfectly fine.

So the flood designation may feel theoretical.

Until it isn't.

Flood-zone status can affect insurance considerations, financing and buyer perception. Actual drainage and flooding characteristics can also matter enormously depending on the property.

And unlike outdated flooring, you can't renovate a house out of its geographic location.

If you're evaluating a property with potential flood concerns, understand them before you buy rather than assuming you'll deal with them when you sell.

Your future buyer may care much more than you do.

Dirt-Road Access Can Narrow Your Buyer Pool

Dirt roads are part of desert living.

For some buyers, they're not a problem at all.

For others, they're an immediate objection.

And not all dirt roads are created equal.

There's a difference between a maintained dirt road that's relatively easy to travel and a property that becomes difficult to access because of sand, washouts, drainage, road conditions or weather.

A flipper needs to think beyond:

“Can I get there today?”

Ask:

How will an ordinary buyer perceive this access?

Someone who loves remote desert living may consider it part of the charm.

A buyer commuting daily in a small sedan may see things differently.

That affects the size of your eventual buyer pool.

Acreage Can Distract Investors From the House

This happens frequently in desert real estate.

Five acres!

Ten acres!

Suddenly the property sounds like an incredible opportunity.

And acreage can absolutely add appeal.

But acreage doesn't automatically fix problems with the house.

If the structure has a poor layout, major system problems, difficult access or other significant issues, additional land may not compensate for those weaknesses as much as an investor expects.

Ask yourself:

Is this genuinely valuable usable acreage for the likely buyer — or am I simply impressed by the number of acres?

Those are different questions.

Verify That the Bedrooms Are Really What You Think They Are

Another potential problem is assuming the bedroom count tells the whole story.

A property may be marketed as having three bedrooms.

But when you walk through it, ask:

Would my future buyer perceive all three spaces as functional bedrooms?

An awkward conversion, unusual access, questionable addition or nontraditional layout can affect how buyers perceive the property.

And even a perfectly legitimate three-bedroom home may have a narrower buyer pool if it has only one bathroom.

Bedroom count alone doesn't determine marketability.

Function matters.

Permits and Additions Deserve Attention

Morongo Basin properties can have interesting histories.

Rooms get added.

Garages get converted.

Structures appear.

Walls move.

Investors shouldn't simply assume that everything physically present at the property matches public records or was completed with required permits.

If square footage, bedroom count, additions or accessory structures are important to your investment calculation, investigate them.

The time to discover a problem isn't after you've renovated the property and are trying to sell it based on improvements or square footage your future buyer, lender, appraiser or insurer may question.

Don't Calculate ARV Before Understanding the Property

After-repair value — ARV — is obviously important to a flip.

But there's a dangerous sequence:

Find cheap property → imagine beautiful renovation → look at highest nearby sales → calculate huge profit.

Slow down.

First determine what the property actually is.

Then determine what it realistically can become.

Only then should you determine what appropriately comparable finished properties suggest about potential resale value.

A house on a paved residential street with two bathrooms may not be an appropriate comparison for a one-bath property several miles away with difficult dirt-road access simply because they're similar in square footage.

The right comparable isn't necessarily the one with the price you like best.

Your Renovation Budget Needs a Surprise Category

If your flip only works financially when absolutely everything goes according to plan, you may not have much of a margin.

Older and distressed properties have a habit of revealing things after you buy them.

Plumbing.

Electrical.

Roofing.

Septic.

HVAC.

Water damage.

Structural issues.

Termite damage.

Deferred maintenance you didn't notice initially.

That doesn't mean you shouldn't buy distressed properties.

That's where opportunities often come from.

But your investment analysis should acknowledge that the ugly house may contain problems uglier than the paint.

Think About Your Future Buyer Before You Become the Owner

This is one of the most useful questions an investor can ask:

Who is going to buy this property from me when I'm finished?

Not:

Who would buy it this cheap today?

You're the person willing to buy it today.

That's irrelevant to your exit.

Think about the future owner-occupant or investor.

Will they want the location?

Will they accept the road?

Does the bedroom/bathroom configuration work?

Will flood-zone concerns bother them?

Does the acreage appeal to them?

Will the finished price compete with other properties offering more desirable characteristics?

You make money on a flip by understanding the exit before the entrance.

Cheap and Undervalued Are Not the Same Thing

This may be the biggest takeaway.

A cheap property can simply be a cheap property.

An undervalued property is different.

An undervalued property may have problems that are frightening buyers away but can be corrected economically enough to create additional market value.

That's what you're looking for.

The opportunity isn't necessarily finding the cheapest house.

It's finding the property where the difference between what's wrong now and what buyers will pay when it's corrected leaves enough room for the investment to make sense.

Sometimes that's a terrible-looking house.

Sometimes the prettier cheap house is actually the worse deal.

Thinking About Buying a Morongo Basin Fixer?

I work throughout the Morongo Basin, including Yucca Valley, Joshua Tree and Twentynine Palms, and I've seen plenty of properties that look like opportunities at first glance.

Some are.

Some have expensive surprises.

And some have characteristics that no renovation budget can change.

If you're considering a Morongo Basin property and want a real estate perspective on its potential resale market before you buy, contact me.

I can help you look beyond the purchase price and think about the question that matters at the other end:

Who is going to buy this property when you're finished — and what will they realistically pay for it?

If you are in a situation where selling may make sense mid repair or if Tyou've already completed the renovation but the property isn't selling:

Read: Why Didn't My Morongo Basin Flip Sell After I Renovated It? 

You can also complete a property options review, and we will get back to you ASAP.  If you're browsing diring business hours and want immediate attention, give our broker a call or send a text  Dawn 714-932-1746.  Tell me her happening, and we'll start there.