Next Step: Hire an inspector?

Question

Hi, I'm in the process of looking for my first investment property. I understand comps, but I'm not sure about repair estimation. Should I hire an inspector to walk properties with me and then get a contractor to look at the report for my first few deals until I get the hang of it?  Is there some other way to do a general estimate or is this how it's normally done?

Dylan Jones · Answer

I am a property inspector in the LA area. I do both residential and commercial properties. I can give general estimates on most costs with regard to roofing, HVAC, electrical, plumbing and foundation, etc. Contact me if you are looking for help in this area.

Josh Bowser · Answer

Hey Neisa - in all honesty, it's not that common to hire a inspector to walk a property before you are actually under contract. This is throwing money away for the most part as they will charge for their time if they have a lot of business.

It is more common to have a GC walk a property before you go under contract, but the good ones will stop answering your calls if you never pull the trigger. However, it's always best to walk the property with an agent who can give a decent guestimate on the repair cost of the house to see if the list price will work before sending out a GC.

If your properties are ideal for flips and they are actually priced to sell, they will likely go under contract before you can coordinate all of that so you need to be on your game at all times.

If you're working with an agent, they should be able to provide you with a rolodex of inspectors, lenders, and GCs they work with to take the burden off yourself.

This is what we typically do at our brokerage when there is a due diligence period:

1. Agent walks the property (or can get a good enough ball park rehab based off photos)

2. Make an offer based on repair cost & ARV

3. Property goes under contract

4. Inspector and GC walk the property ASAP and provide reports

5. Decision is made to either proceed, renegotiate, or drop the contract within the DD period

Corby Goade · Answer

If you really want to get deals, you'll need to be able to estimate your own expenses based on your own walk through. Good deals get snatched up in a matter of hours, not days. You can't expect to get a good deal and have an inspector walk through, give you a punch list, then get a bunch of contractors out there to give you estimates. The property will have been gone long before you get the info you need.

Connect with some local investors doing what you want to do and ask them/pay them/add value to them in exchange for them walking properties with you and giving you an idea of SOW and cost. You'll need to act very quickly if you happen to come upon a real opportunity.

Best of luck-

Ryan Bakerian · Answer

One thing I'll say is find a good home inspector you can trust and build a good relationship. Like Agents these guys and gals are worth their weight in gold. I have one guy I've used for 10+ years and does most of my personal work for free because I send him 20+ inspections a year.

Bring them on the initial walk. Call local Agents in your area they should be able to reccomend someone reputable.

Erin Church · Answer

Hey Neisa,

I feel like getting a network of investors in the area is really helpful! You can start to get an idea of what all is wrong with a property if you walk some with others and can also get a feel for pricing. I know there are plenty of wholesalers and meetups in Atlanta. :) I'd start going to those gatherings, chatting with people, asking if you can tag along when they're walking a property, and have them share their thought processes as they walk. If you go to a showing that a wholesaler is holding, make it clear to other investors that you aren't buying this one - they will be more likely to share what they're thinking.

Also, all the things that @Alecia Loveless is great advice! Getting a contractor to walk a property with you when you don't already have a relationship can be challenging though. To get started, try to find an investor-friendly contractor and offer to pay them for their time, especially if they're walking a property that you aren't under contract with.

Also, I hear there's a good book about estimating rehab costs somewhere (in the BP library) ;-)

Alecia Loveless · Answer

@Neisa Adams Usually you look at the property (I bring my contractor on the initial showing because if he says no to a property then the deal is dead in the water to me) then you decide if you’re making an offer, then after your offer has been accepted you get an inspection done and once the inspection report comes in you get your estimates.

So yes it is important to get a contractor on board who can give you estimates quickly it just depends on when in the process you want to get him involved.

I’ve worked with my contractor for 20+ years so he can give me an initial estimate on how much it will cost to get a building running or if it’s already got tenants how much it will cost to get it up to code. Then after the inspection he goes over the report and revises the estimate based on any new information that comes available or big ticket items that may have shown up.

My offer is usually based on his original estimate of the cost of repairs. For instance if he says $20,000 in repairs I’m not that worried and will offer close to where I figured I could offer based on income and expenses. If he says $75,000 I know I have to lower my offer.