First time purchase of investment property

Columbia, Maryland
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First time purchase of investment property

Ken C.
New to Real Estate · MD · Member since 2022 · 3 posts · 0 votes

Hi BP,

I have been using the BP tools like crazy and find it very friendly and informative. I've done random Rental Property Calculation and used Rent Estimator tool on multiple properties. I've found several properties that I thought would work. So I've found  a duplex for sale and the duplex are currently occupied with current tenants. With the price it's currently asking and the current rent income, it has a CoCROI of 6% but that is with cash purchase. I have the report available and have it posted here on BP forum, (https://www.biggerpockets.com/...) My question is, knowing that there are current tenants and it is producing income from day one, would/should you go through with the physical inspection of the property? I understand there is still paper work/research that should be done on the property.

Thank you,

Ken

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  • Account Closed
    Investor · Denver, CO · Member since 2022 · 184 posts · 78 votes
    3y

    Hey Ken,

    I am an acquisitions analyst at a real estate investment firm based in Denver. I model properties in our tow midwestern markets of focus and send those models to our clients, many of which are also new real estate investors. We have partnered with property management companies and realtors in our markets of focus so we aren't sending out-of-state deals to clients and saying "good luck managing this". 

    It sounds like you are newer to the investment category. I'd be happy to chat if you'd like. Shoot me a DM.

    Thanks!

    0Reply
  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    3y

    @Ken C.
    Yes. Whether there is tenants or not have the property inspected. If you are local you can walk it and send a contractor in. If you are out of state, send an inspector in and have them put together a report. 

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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    3y

    I would do an inspection. I never recommend waiving that unless you have walked it and have experience. That will also give you an idea of how the tenants are and how up kept the home is. 

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  • Mike WebberPro Member
    Real Estate Agent · Reston, VA · Member since 2020 · 84 posts · 53 votes
    3y

    Definitely do an inspection. I had a duplex under contract last month and had to back out after the inspection revealed big issues with the foundation and we couldn't come to terms on the credit they'd pay us to fix it. That was in Winchester, Virginia

    How local are you looking? Is it in Maryland or DC, or are you looking at something in another state? If you can't go yourself, get a recommendation from somebody in the area that you trust for an inspector and maybe even have them go or do a video for you. Something. I would not buy an occupied duplex without an inspection. If the cashflow is great, there is a decent likelihood it isn't in the best condition if it is close to where you live. Maybe not the case in other markets, but the DMV has a real premium on prices compared to the average across the country.

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  • Jeff Roth
    Real Estate Consultant · Ann Arbor, MI · Member since 2022 · 465 posts · 255 votes
    3y

    Hi Ken-

    Great question!

    I always recommend an inspection of the property and don't forget to camera the main drain to the road to make sure it is functioning and not needing repair or replacement.

    If there is a well and septic, I also recommend having those systems inspected.

    Also, check with the local government authority the property is located and see if the rental license is current and if there have been any violations or permits pulled. Also, check for complaints about the property as well.

    You also want to read through the existing lease to confirm rents and existing terms on leases and other things in the lease you will have to live with until it renews.

    Happy to help!

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    3y

    @Ken C. what happens if you buy it without an inspection and a few months later it needs a new sewerline costing tens of thousands of dollars?

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  • Solomon Morris
    Rental Property Investor · MD · Member since 2018 · 287 posts · 205 votes
    3y

    Spend the money to get an inspection. you'll find a lot of inspectors understand how to respectfully navigate a home that's currently being occupied. Recommend alerting the tenants in case they have pets or furniture blocking access to capex items or access to areas of the home.

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Start leveraging other peoples opinions in the industry instead of calculators. Call up realtors, investors, wholesalers and see what they think of the deal 

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  • Account Closed
    Investor · Denver, CO · Member since 2022 · 184 posts · 78 votes
    3y

    Hey Ken,

    I am an acquisitions analyst at a real estate investment firm based in Denver. I model properties in our tow midwestern markets of focus and send those models to our clients, many of which are also new real estate investors. We have partnered with property management companies and realtors in our markets of focus so we aren't sending out-of-state deals to clients and saying "good luck managing this". 

    It sounds like you are newer to the investment category. I'd be happy to chat if you'd like. Shoot me a DM.

    Thanks!

    0Reply
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