Rental Property Investor · Alexandria, VA · Member since 2019 · 45 posts · 8 votes
Hello good people!
First let me say I don't have much experience in real estate but I'm open to learn and grow, and I know this is one of the most used paths for financial freedom. Anyway here's the deal it's a 3br 3bath townhome in NC asking $95,000 made an offer for $88,000 and it was accepted, they want a $5000 deposit and no inspection. My realtor went out and got video of the property and from the looks of it it's in pretty good shape there are minor issues like paint, a small dip in the floor, cracked window, oh out front there's roots growing up around the driveway (which I know could cost a pretty penny to fix driveways) but I'm not sure if there's any foundation, electrical, or plumbing issues. Being that this would be one of my first deals would you recommend taking on this deal? Also it would be a buy and hold and I could get from $1000-$1200 rent in that area.
Rental Property Investor · Denver, CO · Member since 2021 · 1 post · 2 votes
5y
@Joe Villeneuve
I agree, without an inspection to let you know about the solidarity of each aspect of this house (I.E, if there’s wood rot from leaks causing the sup in the floor or something else causing the shift, expenses may outweigh your rental cash flow and put you under at least temporarily
There is a difference between getting a professional home inspection and your personal viewing the property inside and out to determine what repairs are necessary and the cost for those repairs. Ask to view the house, take picture of everything and post them on BP.
If the plumbing drains, sewer and water piping are in bad condition and there is no water volume when someone wants to wash dishes, take a shower of flush the toilet and brush your teeth as the same time then replacing all your water piping, drains and sewer could cost $40,000.
You need to know if the house has enough wall receptacles to handle a microwave and all the electronic gadgets people have today. Some older homes still have only one wall receptacle in the bedrooms and some don't have even one receptacle on kitchen countertops near the kitchen sink.
I would seriously need to see the property, but if you are only getting $1200 per month for rent even if the house is in fair condition you are cutting your profits super close because the $1200 is super low even if the house is in excellent condition because when a tenant moves from a house the cost to clean the house, paint, make repairs and there is always some major costs like you need new kitchen counter tops, or you need to replace the stove, or refrigerator, or a dispose, or some sinks are cracked and chipped and you need to trim trees and shrubs and the list goes on and on. For every house I clean and repair when a tenant move costs me $6,000 to $12,000 and that is when I personally do the work with one or two employees. So, $1200 per months is not enough money to cover your cleaning and repair costs, regardless of the current condition of the property.
@Jaquette Green all the posters seem to be spot on with their advice. I also would advise not to put down such a large deposit. I would recommend 1% of your offer price as a deposit. Never do a deal without an inspection. It’s better to loose $500 on an inspection than $85,000 after you purchase the property and realize it’s a money pit that’s going to take $20,000 to bring it up to your standards.
Saint Simons Island, GA · Member since 2017 · 34 posts · 64 votes
5y
@Jaquette Green first of all, fire your real estate agent if he or she ever suggests or hints towards not having an inspection done. In regards to inspections, ask detailed questions of what they will NOT be inspecting. The deeper I invest in real estate, the more comfortable I am hiring an AC company to inspect the AC/Heating system, a plumber to properly inspect plumbing and so on. You get the idea. Often inspectors are too general in what they look at it. May costs a bit more, but having companies that specialize in their respective areas will pay huge dividends. I do believe there are really good inspectors out there but many are too generalized. I have more than 5 rentals (townhomes, houses, and one condo) I have also just completed a renovation on a new investment. I have learned a ton and you will too. Let the numbers and logic guide you, not your heart. And remember NEVER ever tell anyone what your budget is for having something fixed or repaired. Allow them to give you their quote. As with many of us on here, we could go on and on with real estate investing stories and lessons learned. You will do well. Take your time. Good luck.
@Jim Holub thanks Yeah I was moving with emotion (excitement) and left my logical mind behind hehe
Don't feel bad, you are more the norm. I used to go to these big open houses with distressed properties where 100 people would swarm the property and make their B/F offer right on the spot. It was common for me to hear people as I wandered around talking like "Uggh, the paint color and the carpeting, let's offer them $50k less" ....while I was crawling under the house and opening up the main panel......I had to chuckle as I drove away, usually making no offer at all.
You're young and new to this risky, vicious game. Always get an inspection!
Investor · Tampa FL, USA · Member since 2019 · 72 posts · 20 votes
5y
@Jaquette Green
I agree with everyone else. Passing on an inspection is something only a seasoned investor should be doing. Even they miss stuff too!
Do not skip on the inspection for the first buy. If the offer has already been accepted and you have time to do your research before closing, get the inspection. If their counter is to remove the inspection, counter back and say no to that portion.
Rental Property Investor · Cincinnati, OH · Member since 2020 · 84 posts · 81 votes
5y
@Jaquette Green
Unless you have allot of construction experience and can recognize termites, previous water damage, what wiring is ok vs bad, etc I would get an inspection.
I've seen hundreds of houses and I still get inspections because they always find things I miss even if it's minor.
For Instance, I recently learned not all knob and tube is bad and it was used in some cities into the 1980s!
Hey! I recently was under contract for a newly renovated SFH. I'm a remote investor. The property looked amazing in pictures, lots of work done (new, roof, flooring, etc). The inspection came back with an electrical concern that actually meant the property was not up to code. This could only have been determined by the inspection. I would never waive this clause.
Lender · PA · Member since 2019 · 535 posts · 461 votes
5y
If the owner will not accept your contract without an inspection I would pass for many of the reasons others have already pointed out. I prefer investment properties without condo fees if at all possible. The fees are a wild card and so are the assessments!
Real Estate Agent · Boston, MA · Member since 2019 · 5 posts · 4 votes
5y
Hi Jaquette, Save yourself a headache and get a home inspection. "As is" properties can really run the gamut on what repairs need to be done. As others have said on this thread, you have no idea what is going on without a through inspection from a GOOD home inspector. Home inspectors can run the gamut too (just like every other profession). Do your own due diligence on finding someone good to inspect. I speak from personal experience - my own home inspector was recommended by my realtor. I found out later that he missed so many things -- he was really just wanted to keep his referrals coming from the Real estate firm. I also found out he got sued 5 times later. So, like I said due diligence on your part, do not solely rely on your buyer's agent.
Rental Property Investor · Columbus, OH · Member since 2015 · 184 posts · 162 votes
5y
@Jaquette Green
Hello! If the deal is AMAZING- well below market rate/food equity OR great cash flow such as 2% rule or above, then a formal inspection is less of an issue because there's enough margin to cover big expenses that might come up. Example, I got a 7 unit for $130k - 15k per door, that cash flows very well. The owner had updated all the utilities already too so lots of risks were reduced. That was my first property. Now I've learned that just because the seller says ‘as is' with no inspection, doesn't mean you can't still get one at all. Are you working with an agent? Go over the contract and ask questions to verify all this in your area/state. But back to the deal… barely over 1% is not great enough for me in principle because it sounds like it's not worth much more than 100k so you can't BRRRR and get most/all of your money back and doesn't seem like it's a good flip either - what are fixed up properties like this one selling for in that area? If it's worth $160k after you buy it for 95k and put 20k into it/all in for $115k it makes sense because the numbers to BRRRR or flip (all in for 70% of ARV). Make sense? But take all our responses with a grain of salt and clarify what your goals are. That will help determine it it's a good enough deal for you.