Well I'm getting really discouraged. I live in NYC, so being an out of state investor is a must. I'm looking all over trying to find a decent deal that compares to some of the success I see here on BP. First deal I had to walk away from due to defects on the title that the seller wouldn't fix. Now I found 2 houses for 30k each which I thought were good deals and ordered inspections for them thinking it would be an easy win. Then the inspections come back, with all sorts of problems. 3 layers of shingle roofing, making them uninsurable, open electrical sockets and bad wiring, cracks in the foundation, etc. The seller isn't willing to reduce the price, and the inspector basically said I'd have to spend almost the same as building a new house to fix all the issues.
The inspections saved me from losing even more, but I basically just threw away $800 in inspections on 3 properties I won't buy. What can I learn from this, and how can I stop wasting on inspections only to find the deal would never work? How do you weed out the bad sellers and wholesalers and find the ones that have really good deals?
Find a realtor who has a background in construction so he/she can spot these problems before you place your offer.
You did not throw away $800 in inspections. You invested a mere $800 and avoided many thousands of dollars in problems not budgeted for.
Tip #1: Learn to turn lemons into lemonade. What's good is bad and what's bad is good.
Tip #2: Ask better questions. Learn everything you can from these inspection investments.
I agree with Rick. Also You got super lucky with great home inspectors. Don't forget to send them a thank you card.
Are you looking at these properties before making an offer? How are you finding these properties? In lots of areas if you really try to scrape the bottom of the barrel for low price properties they're all going to be really junky. If the problems are obvious, sellers consider that when setting the price and expect buyers to consider than when making their offer. If you come back requesting adjustments for problems that would have been obvious on a casual walk through of the house you're not likely to get much traction when requesting a price reduction. If the inspector points out non-obvious things you may have better luck.
You should be studying these inspections so you can spot these sort of issues yourself. Not sure what "bad wiring" means, so that might not be obvious when looking at the property, but everything else you list would be. Now that you're aware of these sort of problems, look for them yourself. Go with the inspector when they do the inspections. Its a good way to learn. In part what you're getting for your $800 is an education in property issues.
If you want lower hassle deals you may have to move to a somewhat higher price point. It depends on the area of course, but there are very few places where you could expect to find a house for 30k that doesn't have issues like needing a roof. (And the areas that have decent places at a low price will also have a ton of cr*p places at that same price.) so you'll probably have to kiss a lot of frogs until you find a prince. How are you finding your deals? from wholesalers? are you going out and looking at the properties yourself first?
This is going to happen a lot when offering on properties sight unseen.
If investing out of state, You need someone you can trust, who has the knowledge and skills to sift through the good and bad deals ahead of time. They could look at property ahead of time and potentially save you from wasting your time doing an inspection in the first place. They would also know the good and bad areas of town. For example, here in TN, you could buy investment property all day every day for a fraction of the costs in NY. I am an investor and Realtor, and I have also done flips and spec builds here in TN. If I had someone from out of state call and want my help, I could find them exactly what they were looking for. I have relationships with inspectors, handymen, plumbers, electricians, roofers, etc. In my opinion, this is the type of person u need to establish a relationship with in whatever city you are considering investing in. Without that, I personally think it is a crapshoot.
I feel your pain as investing long distance does not allow the desired walk-through I want to urge you to not be discouraged because as it was mentioned, these inspections have been an investment in your education and saved you from the problems you would have bought without them. Try to form alliances, especially in the form of partnership with a local investor who can be your boots on the ground person. It takes time but when you do find that person it is well worth it as illustrated in Mehran Kamari's podcast
I am trying to find that perfect partnership myself!
A good Real Estate Agent should be able to point out most of the problems that you listed prior to inspection. If all these things were a surprise to you when the inspection came back i have to question your attention to detail and understanding of what your buying prior to inspection. Either learn what to look for on your own, or hire someone to do it for you. Either way, i agree with the comments above. Dont look at this as a loss. You simply invested in your education which is never a bad thing. Keep on keepin on!!!
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.