You just got a lead on a potential deal. It might have been found on the MLS. Perhaps a bird dog brought it to you, or maybe you got a response from some of your marketing materials. Whatever the source, your next likely step is to go and inspect the property to determine what work (if any) it needs and what you can offer for it. This is often your one and sometimes only chance to inspect the property and develop a rehab budget/offer. Time is often of the essence here because if it truly is a deal, it is likely to get snatched up quickly so you have to be accurate and move fast.
The key to this step is to not overlook anything when conducting your inspection. And the key to not overlooking anything is to have some sort of checklist with you. A checklist is an essential part of this inspection process. It helps ensure that no critical components are missed. Believe me, if you try to inspect without some sort of list, you will likely miss something, and it will end up costing you money.
So what should be on your inspection checklist and what should it look like? I really cannot answer that question because everyone is different, and everyone processes information differently. I have used and have attempted to use many different checklists over the years. Some were too long and cumbersome; others were too short. You will likely have to mash together several different lists from different sources like I did to develop one that works for you. Whatever you end up using, your checklist should be thorough and should flow very easily so you can get in and get out quickly and accurately.
Here are some of the main components that are on my inspection checklist with a bit of explanation of what I am looking for.
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Does the property need a new roof? Look closely and from a distance. Know that sometimes you can get the best view from a second story or attic window. Are the shingles worn? How many layers are up there? Does the decking seem bowed and rotten? Make notes on what you find.
Take a walk around the entire building, paying close attention to the structure near the ground. You are looking for cracks. Not small cracks; every building has one or two of those, but major ones. How big is major? It is hard to tell, as every situation can be different. If you sense something is wrong, look harder. Crawl in, around and under the property if you have to.
Do the windows need to be replaced? Perhaps you only need storm windows. Count the number of windows to figure a price later on.
Pretty self explanatory. Be sure to look at and include notes on any rotten wood, brickwork, siding or stucco that may need replacing.
Find the electrical meter and panel. How old is it? Are fuses still in use? How about the service? Is it adequate for today’s needs or is an upgrade needed? Be sure to factor in the installation of HVAC equipment and high powered appliances such as stoves and dryers if you need to.
Does the property have an HVAC system? If yes, how old is it? Does it look like it is working? Has the condenser and other copper parts been stolen? Look closely as this can be missed especially on the inside equipment. Crawl into the attic, basement or wherever else you need to and find out.
Are the copper pipes missing? Do you notice any sinkholes in the front yard? Will sinks and other fixtures need to be upgraded or replaced? Make notes of now many and how much you will need for later estimates.
Does the interior need painting? Most likely the answer is yes. Will priming be needed? Is there wallpaper to be removed? How about popcorn ceilings? Take note of these items. I like to include drywall and trim repair here as well, but you can separate these things out on your checklist if you wish.
Kitchen and Bath Remodel
Does the kitchen look like something out of Leave it to Beaver? Does the bathroom have pink toilets and tubs? If so, you are likely looking at a major kitchen and bath remodel. How big and how much will depend on what your goal for the property is. Will it be a retail flip or a rental, for example? A retail flip will likely require more expense than a rental. With a rental, you may want to simply repair and paint existing cabinets, rather than replace them. It will also depend on your local market. Always remember, though, that kitchens and baths sell the place.
What type of flooring is there? Does it need to be replaced? Will you need/use carpet? Can the hardwood floors be saved? How much ceramic tile will be needed?
This can include items such as ceiling fans, light fixtures, door knobs, window treatments, etc. It is all of those little things that go into a finished product and make it look nice. Make notes as you go through the property.
Will you need to install a stove, refrigerator and washer and dryer? Perhaps a dishwasher and a garbage disposal are needed as well. Don’t forget to look at the hot water heater. Often the date of manufacture is right on the water heater’s label.
In essence, you are looking at and making notes on the major components of the property. Sometimes these inspections are quick and relatively easy. Other times the utilities are off, the property is packed with junk or the owner is following you around constantly making comments. No matter, I try to go in every room (attics and basements included). I look for both hidden problems and the obvious ones. I complete my list and then as soon as possible begin to tally up costs while they are fresh in my mind. Only then will I know if I have a deal or not.
So what is on your list? How do you inspect a potential deal?
Leave your comments and let me know what I missed below!