 When it comes to buying an investment
property, having a good inspection report can make the difference
between turning a healthy profit and buying a money-pit!
Investors will always run into opportunities to purchase where having
no inspection contingencies will give them at an advantage. In general,
such opportunities should be left to experienced investors who
thoroughly understand what to look for when previewing a property with
an eye to buying it as an investment.
For the majority of investors, a licensed inspector should undertake
a thorough property inspection. Any offer to purchase should include an
option to cancel the offer or renegotiate the price if a subsequent
property inspection reveals defects that had not been accounted for when
making the offer.
The Right Inspector ... Good vs Mediocre
A good inspector can find the problems associated with your potential
investment that you miss; a mediocre inspector may only report on things
that are obvious.
As well as being licensed, you should check into the background of
any inspectors you might be considering. Even if you are using a large
inspection company with many inspectors, you can ask for about the
experience of their inspectors before determining who to select.
Once you find a good inspector, you'll want to keep the same one for
all your properties, so it's worth taking some time upfront to do your
homework.
Look for experience in the construction industry prior to their work
as an inspector. Some inspectors may have worked as building inspectors
for local towns.
You want to find an inspector who is willing to have you walk the
property with them and explain their findings to you as they go. This
allows you to get a thorough understanding of the property and forces
you to examine the property in more detail.
A thorough property inspection can take over two hours [I've even
had inspectors take four hours{ed}].
Hidden Problems
Property inspections do have their limitations. In general,
inspectors are not required to inspect anything that is covered up or
inaccessible. This means that some problems may never be revealed unless
the inspector has a good eye for telltale signs of something beneath the
surface. Your inspector should point out the potential existence of a
defect and recommend further, more explorative inspections inspections
be undertaken to determine the extent of any hidden damage/defect.
For example, damp penetration into structural timber may result in
mold, dry rot, wet rot or insect infestation, any of which may be hidden
from view. A sharp-eyed inspector will spot the source of damp
penetration and point out the potential danger of hidden damage. Most
damp problems leave telltale signs.
Buyer Beware
Damp penetration can be a big problem because it can cause
significant hidden damage. A small roof leak left unattended for several
years can result in rotted roof sheathing, mold behind walls, insulation
deterioration, rotted timber framing, rotted floor joists and floor
sheathing. Unattended damp can also result in dry-rot, which can eat
through all the timbers of a property, regardless of whether they are
damp or not.
 Signs of structural damage to the
foundations may be revealed as a result of an inspection. Most
inspectors will be able to identify this potential problem through
telltale cracks in the walls and foundations. Where large structural
cracks are present, it makes sense to get the opinion of a structural
engineer.
 Not all inspectors will undertake a pest
inspection, so it is wise to check and be sure you receive a pest
inspection at the same time as you undertake the structural inspection.
Termites and Carpenter Ants can be a particular problem since their
damage is mostly unseen and can be extensive.
When A Problem Is A Plus
Not all problems are actually negative. As a buyer, you want to find
properties in need of attention because you are more likely to be able
to negotiate a lower price and help the seller out by taking a problem
property off their hands.
Some things that can be relatively easy to fix include:
- Leaky roofs
- Rotten Window Sills
- Damaged Siding
- Leaking Gutters / Downspouts
These problems often cause unsightly internal damage through water
penetration. The result is frequently a property that looks unappealing
but is easy to fix, particularly if the water penetration is relatively
recent. Care needs to be taken to determine the extent of any water
damage and rot in order to budget the repairs accordingly. Provided the
source of the water penetration can be fixed, you can purchase a problem
house and turn it into a pleasant home while making a healthy profit in
the process. [I purchased a property that had a big puddle in the
basement that was putting most buyers off the purchase. Upon close
inspection it was revealed that the source of the water was a downspout
that had been crushed by a lawnmower and which overflowed during
rainstorms. The water flowed down the basement foundation and penetrated
at a joint in the walls. Unbending the downspout to allow the water to
flow into the drain resolved the issue resulting in a perfectly dry
basement! {Ed}]
The Inspection Report
Take time to review the report in detail. Make sure you have budgeted
for all of the repairs required to bring the property up to standard.
Remember, anything you don't take care of will likely come up in a
future inspection done by potential buyers when you are ready to sell.
If there are items on the report that are unclear, contact the
inspector for clarification (Tip: always get the direct phone number of
your inspector).
If the inspector recommends additional inspections by specialists,
negotiate with the seller for an extension to the contract to allow you
reasonable time for these inspections to be completed and reviewed.
Remember, problems uncovered during an inspection shouldn't
necessarily put you off the purchase, but be sure to budget for their
correction in determining the current market value of the property. |
