Hire Inspector or Just experienced walkthrough?
I am under contract for a house in Huntsville, my first purchase from a wholesaler - ever. I have a PM that I'm going to hire and he's very experienced in doing flips and managing properties, and when I brought up the topic of inspection he asked about just doing a thorough walkthrough b/c the water/power might not be on. (I have a week to inspect per the contract.) The PM would also be using his local contacts for repairs on the property before renting it out. This is intended to be a mid-term-ish buy and hold; I'm thinking 2-5yrs.
The margin on this is ok, I'm looking at a potential 12% cash on cash return budgeting for about 10k in repairs, but of course if there is something major, that would get much more slim.
Unless you have walk through and inspected hundreds and hundreds of homes, hire an inspector. They could save you thousands. @Account Closed
I have a construction background, so on my first few projects I inspected the property myself.
However, I have started to hire an inspector upfront because they can provide a list of all code issues that need to be fixed and repaired. I can then include that inspection report in my Scope of Work that I provide to my contractor so they can include those repairs in their proposal.
When I go to sell the property, we should have all (or most) of the code issues resolved, which prevents my contractor from hitting me with a change order to fix the inspection repairs.
If you fix the inspection issues upfront, it will limit the amount of issues your buyer's inspector finds, which should provide peace of mind.
It's never good when you are selling a property and the buyer's inspector provides a 25-page list of items that need to be fixed. This can scare off a buyer (or cause them to ask for concessions) so you might as well take care of these items upfront.
Originally posted by @Patrick Hermans:
Unless you have walk through and inspected hundreds and hundreds of homes, hire an inspector. They could save you thousands. @Account Closed
This. What's an inspection cost? $300-400 tops? Definitely find a reputable one in your area that will crawl inside, under, and over the house. Walk with the inspector and see what areas they're looking at, so you get a feel for the next property you check out yourself.
On my first deal, I hired an inspector, and I am glad I did. Spotting everything is hard. The more qualified people that look at your transaction the better. After my inspector came in, I was able to negotiate a lower price. Why do you only want to hold the property for 2-5
@David Robertson, I would hire a GOOD inspector, someone who has been doing it for 5-10 years +, for the 1st few. Walk the property with them and learn what to look for. After the 1st few you should have a good handle on what to look for, what it will take to remediate and the costs.
Best of luck.
Chris
Bear in mind most home inspectors are generalists. They know a little about a lot, or a lot about just a few things. Many of the inspections I see from buyers of my properties have phrases in them like "looks like possible mold, recommend further inspection by a qualified professional" or "roof may be nearing the end of it's lifespan, recommend a certified roofer do further inspection". So it's CYA 101, but are they really telling you something that you couldn't have figured out for yourself? Unless you find a really good inspector who is experienced working with investors and distressed homes you're better off walking through with your contractor and saving $400.
Once you know the big things to look for (foundation, roof, hvac, electrical, etc...) you'll be able to walk through a property in minutes and have an idea of rehab scope and cost.
For the purposes of your strategy, hire a professional inspector. The $300 or so it costs may be recouped immediately if something major is found and the report can be used to renegotiate the contracts in such a case. If nothing major is found, at least you have piece of mind for yourbinvestment dollars.
Don’t skip this step!! This comment comes from an experienced Investor capable of doing my own inspections.
Thanks to everyone for responding so quickly. I went ahead and got a real inspection done on the property. Luckily looks like nothing major was discovered which made me feel alot better. This property is in another state, so I couldn't be present myself. I'm relying heavily on the realtor and property manager I'm working with to make sure all goes well.
@Max Keller Great question on my holding timeframe. Long story short - I need to create some "monetary velocity" with my real estate investments. If I was able to refinance 100% of my personal money out of it I'd hold it for longer, but I'm assuming that I'll only get back ~40% or so. It's a good deal by many standards, but I'm looking for better deals, and I need the cash for those.