The Facts About Buying a Rental Property Sight Unseen
For some investors, the very idea of buying a property without having visited it in person is simply absurd. For others, however, it’s no big deal. So what if they haven’t personally visited the property, so long as they’ve seen the photos, done their research, and maybe even had a designated representative visit the site? In fact, there are plenty of investors who feel this way.
And plenty of investors can’t be wrong, can they?
Well, yes and no.
Buying a property sight unseen can certainly be done, and it has been done with great success. However, this type of investing isn’t for everyone. Before you make this sort of deal, you need to understand the facts of buying property in this manner.
Reasons to Purchase Sight Unseen
First, we need to understand why anyone in their right mind would buy a house without laying eyes on it. There are lots of reasons, actually, and none of them are “because they are crazy.” One of the most common reasons is that the investor is located out-of-state, and it’s simply not feasible for them to travel to said property. Some investors also purchase multiple properties (I’m talking several per month), and with so many deals going on, it just doesn’t make sense to spend the time visiting each and every property, especially when some of those deals will certainly fall through. Additionally, in many instances, the properties in question are foreclosures that are up for auction, and these aren’t always available for viewing prior to the auction. Finally, it’s really NOT crazy to buy a rental property without seeing it. Remember when I mentioned photos, research, and possibly even a designated representative checking a place out? These all make blind investing possible.
Making an Offer
Making an offer on a property you haven’t seen before is another area we need to discuss, because it’s not quite the same as making an offer during a traditional purchase. With a traditional purchase, you’ve done a walkthrough, so you have a good idea of the property condition and what work needs to be done. Not so with a sight unseen purchase. So how do you go about making an offer? Well, usually the seller will have a baseline price established, so at least you know what they’re hoping to get. But what they may not be factoring in are any repairs that will need to be done, or other attributes that could actually drive the price down. That’s where the pictures, research, and/or a visit from a contractor or other pro comes in. You’ll also need to look at comps for the area. Once you have all your information gathered, you can make an offer and go from there.
I’m not going to sugarcoat it; there is added risk when purchasing real estate without having seen it in person. One of the biggest drawbacks is in problems that the property photos don’t capture. What happens when there are major issues with the foundation, but all you’ve seen are photos of the home’s interior? Fortunately, much of this risk can be mitigated by adding a contingency clause that states that the contract won’t be binding until an inspection is performed and the buyer is satisfied with it. With this clause in place, the buyer can cancel the contract if something turns up in the inspection that they don’t like, or if the seller refuses to drop the price due to necessary repairs.
Buying an investment property sight unseen is not crazy. It’s not the preferred method for most investors, but it’s definitely not crazy. The key is in arming yourself with as much information as you can, and taking steps to minimize the risk.