1st time buyer, 635K Triplex, Inspection report scary?

Question

Hello,

First time investor here. Received an inspection report on a triplex. Really thought it was a turnkey investment with inherited tenants. Using an FHA loan and will be living in one of the units for the first year. When we received the inspection report back, we while we know inspection reports are thorough, we were slightly shocked by what seems to be structural and immediate repairs. With that, we are okay and have just a little money to work with to do things like a new roof, but the other stuff seems be too much for us as first investors. Experts: what are your thoughts on the following? Is this reason to back out?

1. Need new Roof + flashings + added ventilation

2. Gutters need to be cleaned

3. All windows replaced (30 windows various sizes)

4. Drip leg missing

5.6.A Vent pipe repair

5.6.B vent pipe for gas furnace

5.0.C humidifier at utility room gas furnace not working

6.0.A.2 needs plumber to look at sewer connection

6.1.A.2 plumbing leaks

6.2.A.3 existing piping for T&P valve on water heater fails to extend down 6 in. Safety.

6.2.B hot water heater exhaust vent not connected

6.0.C improper drain line connection unit 3, there is sewage smell.

7.1.A ground wire install outside

7.2.A cloth wiring maybe throughout home. Safety hazard.

7.4.C loose wire ends need to be in box in storage room

8.0 foundation- water intrusion visible signs in crawl space.

8.2- undersized wood beams- need reinforcement

10.1.a drywall on wall shows wet stains indicating moisture unit 3

10.2.A unit 3 living room floors are sloped and sagging.

10.4.B sliding door unit 2

10.0.C Drywall on ceiling water stain unit 1 over washer/dryer

10.1.C drywall on wall peeling paint at utility closets

10.6.C electrical issues

10.1.D framing wall leak

10.3.D back stairs need to be redone for roper stability

11.6.A unit 3 exhaust fan not work

11.3.B unit 2 bathtub resurfacing needed

11.3.C improper materials used at the unit 1 hot water supply

11.5.C defective GFCI outlet unit 1

6.4.A new sump pump + battery

Britt Fera · Answer

Thank you so much for you responses and inputs @Paul De Luca and @Tim Jacob. Trying to learn everything we can as green investors!

John Warren · Answer

@Britt Placek 635k is a lot.... is this a solid brick three flat? Or is this a frame property with a foundation made out of random trees the guys in the 1800's found? Both can be found here in Chicago.

I would be very cautious when taking on a home where you know you need a new roof plus structural potentially.

Most of the other stuff on the inspection report isn't that big of a deal.... a lot of residential inspectors will flag a million things like this, and it is hard to sift through to find the meaningful repairs that costs thousands or tens of thousands versus a humidifier not working (hint... none of them do).

Bob S. · Answer

My question, you walked it, so how is it you were not aware of all these items, ? There is only one bigger ticket item, the roof, but that is done in a day so no Biggy. Also, its ALL about the numbers, you simply get it for 25k less. HOWEVER, since you do not have experience, I strongly suggest you flip the contract to someone with experience. Make a few bux, learn then move on

All the best

Mike Hasson · Answer

A lot of that looks like small stuff. There are a few big ticket items, but as an investor, to me that means value add potential. You should do enough market research to get ARV value with comps to make sure those repairs are priced in. I'd suggest to get estimates on the big ticket items and make sure that those repairs are priced into the deal.

And if you're concerned about paying for repairs out of pocket, your lender may even have options to finance that stuff through your mortgage - ask them about "credits". Just make sure the property is discounted accordingly - your realtor can help you with that, but remember to always run your own numbers too. Trust but verify

In any case, it would behoove you to understand everything in the report, since a lot of those items you will see in nearly every inspection. Understanding will help you to prioritize.

One approach I like to recommend to my own clients, especially first time buyers, is to upload their inspection report to www.RepairPricer.com. It uses AI to provide estimates for every item in the report, and does so with alarming accuracy. More people really need to know about this!

Hopefully this helps!

Naz Hossain · Answer

Home inspectors point out EVERYTHING that they see/inspect. It's their job. It's your job to prioritize and fix issues that would make a property habitable for your tenants. Usually you want to go a few levels above habitable (I do at least). Some of these things are cosmetic and some should be reason for concern like unit 3 living room floors are slopped and sagging, electrical issues? (vague), plumbing leaks, sump pump etc. I always hone in on the MEP issues that are highlighted. Those are big ticket items.

You could dive a little deeper by talking to the previous property manager and checking what those issues are. You could also take the inspection report back to the seller and request concessions or repair (up to code).

Either way, take some time, inspection reports usually come with pictures, you have the upper hand in this market so no need to rush. You can reach out to a contractor in the area and ask them what the cost might be to fix some of the MEP issues. Chances are they will want to see it for themselves if the report is too vague.

If the rents and ARV support the purchase, then don't be too afraid. You can try to get help from a local seasoned investor in your area as well.

Tim Jacob · Answer

Some of this stuff is easy. Some of it might not be. The furnace and water heat vent needs to be fixed as it can kill someone. Thats probably less than 2k. Coming out of winter it probably won't lead to anything bc most likely the lethal amount will come from the furnace. If the sewer issue is below grade that can get real pricey. Maybe get a sewer scope and a structural engineer. Some of those things might not be that bad. Inspections always catch everything and they are loaded with disclaimers. Get prices on the big stuff. Could be a deal breaker on that is how I would look at it.

Paul De Luca · Answer

@Britt Placek

For me personally, this would be too much work unless I was getting a renovation loan and I generally recommend to new investors to avoid properties that need large capex expense immediately like a new roof. The multiple water leaks and signs of structural issues are also concerning.

I always ask the listing agent for the age of the roof & mechanicals upfront and if possible view the roof from the ground to gauge condition so there aren't any surprises.

1st time buyer, 635K Triplex, Inspection report scary?

1st time buyer, 635K Triplex, Inspection report scary?

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