We’ve talked through the interior and exterior in my last few posts, and you can find each of those posts here:
- The Investor’s Guide to Vetting a Fixer-Upper: What to Look For on the Exterior
- The Investor’s Guide to Vetting a Fixer-Upper Interior: Layout, Bedrooms, Paint & More
- The Investor’s Guide to Vetting a Fixer-Upper Interior: Kitchen, Bathrooms, Flooring & More
My hope with these several posts is to help give you an idea of how you do your walk throughs on your potential properties. You don’t have to do it the same way I do, but you can at least establish a way you DO perform them, each and every time. Even long-time real estate investors can miss things if they haven’t gotten a process and checklist of things to look at.
So, in this final post we talk about the biggies that are sometimes obvious — and sometimes not at all. I’m talking about the plumbing, the HVAC, the electrical, and then the foundation, whether it be the basement and walls, a crawlspace, or slab.
(Please know, I’m not a a professional plumber, electrician, HVAC technician, or foundation guy. This is what I’ve learned over the years with problems, deals, and finding solutions for them.)
How to Analyze a Real Estate Deal
Deal analysis is one of the best ways to learn real estate investing and it comes down to fundamental comfort in estimating expenses, rents, and cash flow. This guide will give you the knowledge you need to begin analyzing properties with confidence.
A lot of times to have a good handle on what is going on, you have to be looking both inside and outside. In most of the areas we are buying properties, the electrical lines are above grade. When you are viewing the outside, you want to look at the service wires that come to the house. Do they have a mast (tall metal pole getting the electrical lines up over the house)? Are the lines too close to reach over your head? Does the house have a master power shut off anywhere on the outside/inside?
On the inside, look at the electrical panel. What kind is it? Does it look old or worn? What kind of breakers does it have? You will start to learn what kind of panels need to be replaced. Also, does it seem like there are a lot of boxes or junctions with electrical lines (seen from the basement, crawlspace, or attic)? There might be a lot of DIY issues from past owners or landlords. If you’re not sure on something, have a professional electrician or inspector look at it. It’s always worth the few hundred dollar opinion, rather than a $2k or $5k or $10k surprise. That’s not any fun!
Also, with outlets, make sure they don’t look old or worn. We nearly always replace ALL the outlets in a house. Make sure the kitchen, bathroom, and likely the garage all have GFI protected outlets. And make sure you have functioning smoke detectors in every room.
When I first approach the property, I want to see what the AC unit outside looks like. HVAC can be such a nightmare if it doesn’t work well. It’s so much easier to replace a unit before a tenant moves in than to try to resolve an AC issues when it’s 100 degrees outside. #beenthere
First, IS there an AC unit? If no, then does it have a line set to a furnace, and the AC has been stolen? Or is there simply no line to the furnace? Does the house have some or several window AC units? This is a good indication (but not confirmation) there isn’t a setup for the outside unit. If it doesn’t have those lines/power supply, make sure you account for that in your figures. There is definitely an additional cost for the line set.
There is also current refrigerant and old. If it’s an older unit, it likely has the R22, which is quite a bit more expensive. The R22 price continues to go up as the new units and refrigerant is out there. When I put new units in, I ALWAYS go with a new one, which uses R-410A, so it’s using the latest technology/refrigerant.
The furnace can be found in the basement, crawlspace, a closet or space in the house, or even in the attic. When you look at it, make sure to look at the connections. Does it look like the plumbing is connected correctly? Is the venting is good shape to and from it? What does it look like overall? Make sure to look not just as the system itself, but at all the venting and trunk lines as well.
The furnace has codes on it, and you can pretty easily figure out its age. You can also take the front cover off and look inside. Does it look well maintained? Does it have rust deposits there? If so, there could be some cracking or a breakdown of the heating system and would likely need to be replaced ASAP.
There are a few things to scope out when are you looking at the plumbing. There are three major components: sewer lines, water lines, and gas lines. Each one comes with its own set of potential problems and solutions.
With the sewer lines, you want to start with the trunk line down to the basement. What does it look like? Is it cast iron? Copper? PVC? Does it have a ton of patches and different pieces holding it together? Are there different materials in that? If it’s a multi-story building, likely there is plumbing behind those walls, and you can either tear out whatever is on the wall (not exactly fun unless you’re already planning for that) or you can take what the open spaces give you and make you mind up from there. You could also video the main stack or the sewer line from the house to the connection at the road.
You may need to replace the main stack and put in with the new PVC lines. You may end up needing to run the main line, which is where the plumber runs a long hose-like thing and clears out the line of roots, debris and other more disgusting things. Anything from the house to the street (main water line, main sewer line) is VERY expensive to replace, and it’s definitely worth it to have the plumber camera them and have no surprises. The only piece to remember is the PVC and P-traps that exist under a sink, kitchen, etc. These are (usually) cheap repairs but potential problems, so make sure to put eyeballs on them.
The water lines run throughout the house, bringing fresh water to bathrooms, the kitchen, upstairs and downstairs, to the outside connection to water your grass or wash your car, and to the laundry, wherever that is found. The good news is plumbing these days offers several options to fix things, but in water lines there are also lots of joints that give opportunity for failure and water problems.
The first thing I do is look at the lines in the basement. If there is a crawlspace, a lot of time you can just pass through the entry point and see what’s down there (with the sewer lines here as well) and see what type of plumbing there is. Is it the old PVC type that’s thinner and a little yellowish? Copper? Or PEX? Or even galvanized plumbing? We typically plan to replace lines if there aren’t in perfect shape. Are there a bunch of junctions? If it’s galvanized, is there much rust present?
We can usually do an entire house’s water lines to the sinks/faucets for $600-$800. Again, it’s MUCH easier to do when you have a vacant house than when you have an upset tenant.
And finally, the black pipe that runs your gas lines. These lines are typically found in the basement or crawlspace, unless that property is on a slab, and then they are either in your walls or in your attic. There aren’t as many joints and junctions, but you want to look at its connection behind where the stove goes, onto the water heater if it is gas, as well as the furnace.
If you aren’t sure, or in some cases the city with require this, you can put a pressure test on this system to make sure it’s holding pressure without having gas running through those lines. A lot of times we may simplify the systems and put in electric water heaters so the only gas line running is going to the furnace. We have also done completely away with the gas lines and put in all electric furnace and water heater to simplify for us and for the tenants.
In the basement or foundation, there are lots of little things to look at. First, on a slab you want to look at the outside grading. What does it tell you? Can you see the bottom of the footing (the thicker part of a slab that carries more weight)? If there are major portions that have broken off or separated, it is possible you may need piers (which are very expensive) on the house. These go down 25+ feet to bedrock to stabilize that portion from any more movement.
On a slab you can also do a lot of homework without seeing anything. Does the floor heave? Is there a large upward or downward motion from one side of a room or garage to the other? These are always worth having your inspector or foundation guy look at. It could be nothing; it could be a nightmare.
With a crawlspace, we see both poured concrete as well as concrete blocks here in the Midwest. Take a visual look around the house. Are there bowing walls? Are there large cracks in the foundation wall? Are there grading issues that could cause issue in the future? Does a section of the house sit much lower or higher than other parts? This could also be due to the rim joists or other framing under the house; just be aware.
Make sure you take into account all of these potential hazards or points of failure. You may be able to just fill spaces in the block with the appropriate material for that issue and then go back over with waterproofing/paint on the outside. Normally we just use our exterior paint right over those fixes — it’s waterproof and looks the best.
And in a basement, as you walk downstairs, look at how everything is supported. If it’s a really old house, you might see both old support beams down the center of the house and potentially other supports that are more modern. This isn’t necessarily a concern, but just something to be aware of. How does it smell in the basement? Is it musty? Is there mold on the walls? If so, there is water penetrating down there. And most of the time, water will show you where it is coming from, with the starting and stopping points laid out like clues in the dirt or other materials left after the water has dried.
As you look around the walls, do they appear to be straight up and down? Are there visible cracks? What is the foundation made out of? It could be block, poured concrete, or even stone. How does it visually look? If there are minor cracks in walls, you might be able to epoxy those without any bracing. If there are large spaces in these cracks, you will likely need braces or piers. Braces are the far cheaper option and go about a foot into the foundation floor and are attached above to the floor joists with bolts and concrete or are mortared in. These beams usually run on a 4 ft-6 ft span and cover the distance where that bowing or cracking happens. The piers help raise and/or stabilize the wall from further movement. Piers can be $900-$1k+. Make sure you get someone in there who knows what they are doing. I’ve done $10-15k+ foundation jobs on multiple houses, but I still call my guys in all the time. I’d rather be safe than sorry.
I’ve covered a ton of material in these few posts. It would be a perfect time now to start creating your OWN list for walking through. The other thing I find very helpful is to take pictures and write out the major notes at the end of your walk through. It’s easier to remember when you are in front of the house than when you have been home for a few days and try to remember what you found.
I’d love to hear final thoughts and ideas on your overall walk throughs. What are things you do and things you don’t? What you have found because you checked, and what you had to deal with because you didn’t?
Let’s discuss in the comments!