You just know it’s the one. The color scheme is right; the floor plan is open. You touch the granite countertop and see the kids practicing their multiplication while salmon broils in the stainless steel stove. If you are searching for the home of your dreams, focus on countertops and paint color. If, however, you are seeking buy and hold rentals, refocus. Remember: You are NOT going to be living there. So instead of thinking like an end user, focus on finding all the problems that need repairing.
Below are a few hints for systemizing your initial inspection.
Walk This Way
Homebuyers love to walk into a house and get a feel for the ambience of a place. Investors look at what the costs will be to get this baby rented or flipped. Over the years, I have systemized how I inspect a property:
Perimeter → basement → top floor → main level
Start out by looking around the outside of a property. For more tips on how to do this, check out this article.
The Good, the Bad, the Basement
Avoid the temptation to enter a house and start looking through the rooms willy nilly. I’ve been thrilled with a house, spent time looking in every room, only to find the basement flooded. You can tell a lot about a house by its basement. “Don’t buy me” issues can be found by checking the corners, the floor and the ceiling. Pull out your flashlight and look for water marks or signs of mold. Basements can be gems too because you might be able to add some drywall and voila you have another bedroom.
The Top Floor: It’s All about the Up and Down
Go from the basement straight to the top floor. Many problems on the top floor can affect the main level. Your head should always be looking up and down as you go through a house. Look up at ceilings and down at flooring. Are there water stains from roof leaks? If you see a stain, note the location so you can later double check the roof. Check windows and walls for cracks, leaks and mold. Is the flooring salvageable? Do you see hardwoods under carpet?
The Main Event
If you like the looks of the perimeter, basement and top floor, spend some time on the main level. Again, look up and down. Crouch down and look under the sinks. If you see a lot of water stains or warped wood, you know you might have to do some plumbing repairs. Note any discoloration from water around tubs and toilets. Check out whether the house has 3-prongs. Open the electrical panel to see how new the breakers are. The lewd graffiti on the walls might horrify an end user, but you might be psyched. “Yes, it’ll only take a few coats of paint!”
Use all your senses when canvassing a house. You are compiling an initial punch list to ballpark costs. Does the house smell exceptionally damp and moldy? Do you see ill-fitting doors and cracks in walls? Do you hear Rottweilers barking next door? Does the floor feel wobbly? Taste the… wait! Don’t use that sense here. Also, don’t discount your intuition when looking at a house. Sometimes something just doesn’t feel right.
Don’t Come Out of the Closet
Normally, you look in a closet to note how big it is. But with income properties, you want to look at closets with an eye for finding problems. Look at all the corners around the ceiling. Tucked away in hard to see crevices, you can find holes, insect damage, mold and water stains.
Once you have completed your initial walk through, you will have a rough idea of your rehab list and budget. By systemizing the inspection process, you are less likely to miss costly problems. Now you can make an informed decision on how much to bid for the property.
Question for Readers:
What hints do you have for physically inspecting a house?