When I set out to acquire my first investment property, I was apprehensive. I’d heard so many horror stories about investors unwittingly purchasing homes plagued by structural deficits, mold, or any number of other unrealized, expensive problems. Let’s face it, it can be downright intimidating to invest a large chunk of change into a property that could pose a serious financial risk. I sought out advice from trusted investors with years of experience who all echoed the same recommendation: “Get a home inspection!”
This piece of advice has been invaluable to me over the years. Home inspections have helped me recognize the true potential value of some properties I may have passed up but that required only relatively minor fixes, despite first appearance. They’ve also saved me from making many poor investments in homes with hidden issues not disclosed by home sellers and that I would have never spotted on my own. So how can you minimize your chances of purchasing a money pit? It’s simple. Get a professional home inspection.
Determining a Property’s Real Value
A home inspection is much more than poking a stick at a property to see if it’s alive or dead. Its purpose is to identify all major underlying defects of a house, not just the cosmetic ones. The inspection should be done by a trained professional who is either licensed or has completed industry-specific education. For roughly $200-400, the inspector will examine every space including the garage, basement, attic, and crawl spaces looking for any immediate or potential problems.
You can typically expect a home inspection to take up to four hours depending on the size of the house and the nature of any issues detected. Inside the home, inspectors will look at the plumbing for flow, leaks, and proper pressure. The electrical system will be also be examined for safety issues caused by overrated fuses, overloaded circuit breakers, and faulty connections. And, the heating and cooling system will be inspected for efficiency, safety, and whether or not the HVAC system is sized properly for the home. The major focus points outdoors will be the roof and the foundation, which can both be especially costly to repair or replace.
The final report should detail any issues that were discovered during the inspection in fairly short order. Some inspectors provide their written report on-site as soon as they finish. Others, however, will complete their write-up later in the day. Either way, you should expect to have it in hand within 24-48 hours as a professional inspector will understand the time-sensitive nature of real estate transactions. The information they provide can make or break a deal. With the help of your home inspection report, your contractor should now be able to determine the cost and time associated with the necessary repairs so you can make an informed offer on the house.
A Penny Saved Is Not Always a Penny Earned
If you’re a new real estate investor, as we all once were, you may be tight on cash and tempted to save money by skipping a home inspection. Keep in mind, however, that an inspection can go a long way in helping you avoid a major loss. Without an experienced eye on your side, it’s easy to underestimate how much an expected repair can impact your pocketbook until it’s time to pay the contractor. When you purchase an investment property, whether it’s a short sale, a foreclosure, a bank-owned home, or another distressed property, it’s in your best interest to know precisely what you’re taking on. And many major problems are not visibly apparent, even for experienced investors.
Dealing with structural issues, for instance, can be both time consuming and costly. You’ll have to hire an engineer to evaluate the problem and design a solution, often to the tune of $6-12,000 or more, depending on the size and style of the structure. If the house has several severe safety issues, you could find yourself facing total financial loss on your investment. A seasoned home inspector is money spent up front in order to avoid even higher costs down the road.
Home inspections also provide added security, as the inspector can be held liable if they do not perform their work according to professional standards. If you suffer financial loss resulting from their failure to identify issues with your property, there may be legal recourse available. You will not be left holding the bag alone.
Evaluating the value of property investments can be risky; don’t try to do it on your own. I’ve learned from experience to get input from professional home inspectors, as well as accomplished investors. As an independently owned and operated HomeVestors® franchisee, I have exclusive access to insightful tools and resources like proprietary property valuation software and experienced mentors who guide me on how to maximize my investment equity.
As an added benefit, HomeVestors’ nationwide brand recognition and marketing tools for investors provides me and fellow franchisees with the ability to acquire properties before they even move into the foreclosure process. If you’re interested in maximizing the potential of your future home investments, request an information packet from HomeVestors today.
Each franchise office is independently owned and operated.