Buying a Property Sight Unseen: A Case Story
It’s not totally unheard of for some real estate investors to purchase a property without ever having laid eyes on it. For some, this is necessary. The investor may live in a different state or even a different country, and not have a representative available to check out the property in person. Another instance where I see this is with houses that are being sold as-is at auction, or in markets where the inventory is so tight that waiting to schedule a visit can give another buyer just enough time to swoop in and snatch it up.
So yes, buying property sight unseen happens. And, honestly, it’s not always a bad thing. For many investors, it’s a non-issue, and their “unseen” property ends up being just fine.
But for others, it’s a nightmare.
Case in point:
I have an investor friend, who I’ll call Bob. Bob is a great guy, and a pretty successful investor too. He’s been buying investment properties for about 5 years now, so he’s got some experience, and everything I know about him points to him being a smart investor who’s not typically prone to impulsive decision-making.
Which is why I was somewhat surprised when he told me that he had bought a property without visiting it last year. It was in KC, which is where he lives, which made it all the more perplexing. But, like I mentioned previously, a tight market can force you to move on a property faster than you normally would, and that was what happened in Bob’s case. He had been looking in South Hyde Park, a sought-after neighborhood comprised of older, bungalow style homes. So when one came up at auction as-is, he pounced on it, figuring that he would deal with any issues and the rental cash flow and eventual appreciation would more than make up for it.
Long story short…that’s not what happened. Fast forward one year, and Bob is still trying to get his “sight unseen” nightmare resolved. Some of the major issues he encountered were foundation problems (sinking, major cracking and settling), chimney issues related to the foundation, and a need to remodel the entire house, basically. While he was successful in leasing it after some of the repairs were made, the money he’s made in rent is nowhere close to covering what he’s invested in the property – and won’t be for a very long time.
Of course, hindsight is 20/20, and Bob wishes now he wouldn’t have acted so quickly on purchasing that property. He admits he let the good luck he’s had in the past with properties, and his desire to invest in that particular neighborhood, cloud his judgement. An inspection would have illuminated the issues with the property, but there was no time for one, in Bob’s mind. He took a gamble by buying the home without checking it out, and unfortunately, he lost.
The moral of this story is simple: Before you buy a property sight unseen, make sure you’re prepared for a potentially nightmarish outcome. I personally do not recommend doing this, and I have been investing in real estate for more than a decade and have worked with countless other investors. The ONLY time I think it’s okay for an investor to purchase a property without seeing it with their own two eyes is if they have a trustworthy, local representative (like a turnkey provider) who can visit the property on their behalf – even better if they can get an inspection performed as well. If it can’t be you, someone needs to ensure that you’re not buying a rotten egg, because trust me, you’ll be dealing with the stink for a long time.