New real estate investors often ask me about buying properties with all sorts of different damage. Of particular concern, people frequently ask: should I buy a house with a repaired foundation? It depends. In hot and dry parts of the country like Texas, foundations require regular repair work that shouldn’t stop an investor. On the other hand, if a foundation requires major repairs using helical piers, I advise against buying this sort of house. Too many unknown expenses and risks exist.
In the following article, I’ll dive into some of the additional details about buying houses with repaired foundations—or in need of repairs. Specifically, I’ll cover each of the following topics:
- An Overview of House Foundations
- When to Buy a House with Repaired Foundations
- When Not to Buy a House with Repaired Foundations
- My Foundation Repair Rule of Thumb
- Final Thoughts
An Overview of House Foundations
Prior to discussing foundation repairs, I want to provide a brief overview of the different types of house foundations you may see as an investor. While a wide variety of modified versions exist, builders typically use one of the following three types, depending on the home design, climate, soil conditions, and construction budget:
- Full basement: These are the deepest of the three types, and this foundation typically matches all of the floor space on a home’s first level. While older basements average six feet in height, newer ones tend to be higher to facilitate conversion to living space. Builders frequently use these foundations in colder climates dealing with regular freezing and thawing.
- Crawlspace: These foundations entail short foundation walls standing on footings. As the name suggests, these walls are short enough to actually require you to crawl through the space between the foundation and the first floor of the home. Crawl spaces can be used for storage space or to house appliances like furnaces.
- Slab-on-grade: This foundation type uses a solid-concrete slab resting directly on the ground. In the naming convention, grade means ground-level, while slab describes the single concrete pad. Builders tend to use these foundations in climates that do not deal with regular ground freezing and thawing.
Next, investors need to understand an engineering technique used to repair these foundations, as this will factor heavily into whether or not you should consider buying a house with a repaired foundation.
Helical piers are fabricated steel foundation pins that builders drive into soil with hydraulic machinery. Typically, these piers are inserted below the frostline. While used most frequently in commercial construction, helical piers are also often used to repair residential foundations, meaning investors may see them in rehab properties.
When to Buy a House with Repaired Foundations
After outlining the types of foundations, I now need to answer the original question. In this section, I’ll outline when I believe you should buy a house with repaired foundations—or in need of foundation repairs.
As stated above, the climate can largely drive foundation types and treatment. In places like Texas that have hot and dry climates, home owners need to frequently repair foundations. If you don’t water these foundations regularly, they can become damaged.
However, in these situations, the repair typically doesn’t include a lot of work and tends to cost less than $5,000. As such, this sort of foundation repair work shouldn’t concern an investor. If considering a property and this repair work has already been completed, it shouldn’t prevent you from purchasing. Similarly, if you determine that a property needs this sort of work, it’s easy to do as a rehabber so shouldn’t dissuade you from a purchase.
In colder climates, investors may find houses with foundations that have already been repaired with helical piers. This shouldn’t automatically prevent you from buying a house. Instead, I recommend hiring your own structural engineer to conduct an inspection of the foundation and its repair work (don’t just rely on the seller’s report).
If your engineer determines that the repair work with the piers is structurally sound, you should have no concerns about buying the property. But, I would recommend determining exactly what caused the foundation damage in the first place to make sure it won’t happen again.
When Not to Buy a House with Repaired Foundations
Next, I want to discuss situations when I recommend against buying a house with a repaired foundation—or in need of foundation repairs.
First, let’s assume that helical piers have already been used to repair a foundation. If your structural engineer determines that more work will likely need to be done in the future, I highly advise against continuing with the purchase. When digging under a foundation to install helical piers, the potential for catastrophic damage exists. The foundation can collapse or settle, both of which can do enormous damage to the house.
An engineering report cannot tell you with certainty whether or not this sort of damage will occur when digging under a foundation. As a result, you assume massive risk doing this sort of work, and you’ll be on the hook—not the construction crew—if the foundation repair work causes unintentional damage to the house.
For these reasons, I also highly advise against buying a property that, though not currently using helical piers, may need them for future foundation repairs. Once again, you assume too many unknowns and too much risk when using piers to repair a foundation. As an investor, you should avoid these deals, because you just can’t tell for sure how expensive the repairs will be.
My Foundation Repair Rule of Thumb
As with a lot of real estate topics, I’ve had enough experience with foundation repairs to develop my own rule of thumb:
As an investor or buyer, if the projected foundation repairs will cost less than $5,000, go ahead with the deal. If the projected repairs will cost more than $5,000, don’t buy.
Bottom line, if a repair quote exceeds $5,000, it likely means massive damage exists. And with that much damage, it’s more likely than not that, upon beginning work, more damage will occur. You don’t want to go down this potentially endless hole of foundation repairs. On the other hand, foundation repairs less than $5,000 likely only consist of minor or aesthetic damage, meaning that you shouldn’t be dissuaded from a purchase.
However, I do want to caveat this rule of thumb for investors with actual general contracting experience. If you have extensive experience repairing foundations, you may feel comfortable buying rehab properties with major foundation damage. For these individuals, you’ll need to rely on your own judgment and the unique situation to determine whether the deal makes sense.
At the end of the day, purchasing any property as an investor should hinge on the potential profitability of the deal. You certainly can complete profitable deals with properties that require foundation repairs, but you should do your research. Prior to purchasing a property that has had foundation repairs in the past—or needs them as part of rehab—make sure that you hire a structural engineer to do a full assessment. This information will help you decide whether or not it makes sense to continue with a deal.