How do you factor inspection costs of unbought homes?

2 Replies

Hello,

How do you factor inspection costs on unbought homes. I've backed out of two deals this year when the inspections showed too many unknown issues. I pay for it out of my "real estate reserves" so do I count that $710 against my other property's profits. Just curious how more experienced investors handle this cost of doing business.  Also, would you say $355 an inspection is a fair going rate? 

Technically you cant put those expenses on a Schedule E. I have a real estate business which I file as a sole proprietor with a Schedule C. That expense would go on my Schedule C which is basically expenses I cant attach as operating expenses to a particular property I own. Is a $700 expense that you throw on a Sched E going to trigger an audit? Not likely. Use your judgement. Talk to your accountant. Dont overthink it. 

And Yes @Carrie Giordano thats a reasonable price for an inspection in my opinion. Over time you wont need inspections. You will learn what to look for. Good luck. 

Any legitimate expense finding RE investments, inspections, marketing, etc,  is tax deductible. Inspection costs would reduce your income just as other expenses such as legal, accounting, yellow letters, etc. As far as cost of inspections in your market, you need to check with other companies to see what they charge. Remember that not all inspectors do a great job. Find a good one and stick with them. The cost of an inspection can save you thousands in unseen problems and IMO is well worth the cost.