What Investors Should Know About the Home Inspection Process

by | BiggerPockets.com

Just as you can’t judge a book by its cover, you also would be wise to avoid judging a property by its paint job. Below the surface of your property lies incredible amounts of risk that if not discovered in advance could cause immense financial loss later on.

Therefore, the physical inspection of the rental property you are about to purchase is one of the most important steps in the entire due diligence process.

Should You Do Your Own Inspection?

The first thing I have to point out about inspections is that unless you are a licensed and experienced contractor, do not do your own inspection.

Yes, you should walk through the property and make sure there are no major red flags before spending the money on an inspector, but your official inspection should be done by a real, licensed property inspector.

How to Find an Inspector

The easiest way to find a home inspector is by asking your real estate agent who they like to work with. They’ll likely have the name of someone that they’ve worked with in the past. If you are not working with an agent, or if your agent doesn’t have any recommendations, ask other local real estate investors, real estate agents, mortgage professionals, and/or property owners.

Speed is critical at this point, because you’ll likely only have a week or so (depending on the details both parties signed in the P&S agreement). After the inspection, the inspector may take a couple of days to get their final report back into your hands, and you may need a day or two to think about what to do, so the moment you get the property under contract, the clock is ticking! I would try to get the inspector onto the property within four days of mutual acceptance.

FHA Home Inspection Checklist

Related: 4 Above-and-Beyond Home Inspections That Could Save You Money

The Day of the Inspection

If possible, make sure the power, water, and all other utilities for the property are turned on before the inspection. If there is no water, how can the inspector check for leaks? If there is no electricity, how can he or she tell which lights work and which don’t?

After hiring the inspector, you or your agent will schedule a time for the inspector to look at the prospective property. Although you do not need to be present for the inspection, I highly recommend that you are. You are paying for the inspection anyway, so get your money’s worth! Walk, crawl, climb, and touch every inch of the property as the inspector does, asking questions along the way. By doing this, you will be able to get a better idea of exactly what is wrong with the property so you can make the best decision on what you want to do with the problems you find.

You may get a 30-page (or longer!) report from the inspector, but it can be hard to tell from a written description how bad something really is. The report may say something scary like “illegal and dangerous wiring in bedroom two,” but without being there to ask more questions, you might not realize the issue is simply two wires being mixed up in the light fixture—a 30-second repair!

What Does the Inspector Look For?

Everything! The inspector will look at the property from the foundation to the roof and try to determine what they can about the condition of the property. If there is a crawlspace, they’ll get down on their hands and knees and crawl through the entire thing, looking at the foundation posts, beams, and joists. They’ll investigate for rot, incorrect past repairs, and evidence of rodents. Inside the house, they’ll look at the condition of the doors, windows, walls, and flooring. They’ll check the cabinets, the drawers, the plumbing, the electrical outlets. They’ll look at the heat source and make sure it’s working correctly. They’ll crawl into the attic and look for issues there, and they’ll hopefully walk up on the roof to check out the shingles and the chimney, if there is one. They’ll also look at gutters, downspouts, and any landscaping issues that could affect the condition of the property.

diy-inspection

After the Inspection

The report that the inspector provides you several days after the inspection will likely be scary! This is especially true with older homes. After all, the inspector’s job is to discover every single possible problem they can about the property, and let’s be honest, no property is perfect! In fact, I’d be nervous if the report didn’t contain a laundry list of problems, because I’d assume the inspector had been sleeping during the inspection! Your job, after the report comes in, is to decide which issues are important and which aren’t.

Again, being present for the inspection makes this process much easier.

Should You Use Your Contractor as Your Inspector?

Although there is nothing wrong with bringing your contractor through the property to take a look, I recommend hiring a third-party professional inspector to officially check out the property. Unlike the contractor, the inspector won’t have any conflict of interest with the property, since they won’t be doing the work. Moreover, contractors may be great at fixing things, but they are not generally trained to spot problems. A contractor might see a crack in the wall and begin talking about how to patch it, whereas an inspector will dive in to find out why it cracked. This distinction is very important.

Related: Skipping That Home Inspection? These Horror Stories Will Make You Think Again.

How Much Does an Inspection Cost?

First, think of an inspection as an investment rather than an expense.

The inspector will find things out about the property that you didn’t know, and learning these things up front can either help you negotiate a better deal on the house or save you from problems later on. An inspection can also help you plan the entire rehab process on a property and allow you to create a checklist for addressing all the issues to make the property right.

The cost of an inspection depends largely on the size of the property, but for easy reference, a typical single-family home will cost between $350 and $500 for an inspection. A small multifamily property might cost up to $1,000. Larger multifamily properties (five or more units) get more expensive the larger they are. But again, don’t think about the cost, think about the value and peace of mind you’ll get.

What has your experience with home inspections been? Any advice you’d add?

Comment below!

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like… seriously… a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of “The Book on Investing in Real Estate with No (and Low) Money Down“, and “The Book on Rental Property Investing” which you should probably read if you want to do more deals.

9 Comments

  1. doug harrell

    Absolute good article for the newer investor, this IS NOT the place to try to cut corners and save pennies. Especially when there is a good profit on the line. Nothing would upset me worse than losing a sale/ or worse because i neglected to get an inspection.
    Question 1- If i didnt decide to get an inspection done( i know its in the due diligence step) when under contract, the buyers have an opportunity to get one , correct? and who pays for that inspection? just for clarity and understanding (i’m still very new to this all)
    Question 2- Lets say for some reason neither i ( the seller) nor the buyers got an inspection done under contract. Could they come back after me for potential repairs or money or breach of contract or something???

  2. Jerry W.

    Doug,
    The buyer is the one who wants the inspection. The seller already owns the property. It is too late to discover the problem after you own it. Hopefully you know about your property so as Seller it won’t really help you.

  3. Cindy Larsen

    I have bought 4 duplexes so far this year, with the help of my home inspector.
    I know exactly what work I will need to do on those duplexes over time, and
    have contractor estimates for what it will cost. And the duplexes will cash flow
    (after repairs, of course 🙂

    More importantly, with the help of my excellent home inspector,
    I did NOT buy the triplex with the
    – not to code structural support for some of the floors
    – recalled elecrical panels
    – sump pump in the basement laundry area that the
    washer, and the exterior stairway was draining into.
    I also did NOT buy the duplex with the
    – structural problems with the concrete slab
    – roof problems requiring a complete reroof
    – electrical problems everywhere

    Yes, I paid good money inspecting properties I did not buy,
    and yes, it was definately worth it.

    In one case I spent $500 and saved $30,000 to $40,000 that
    I would have had to spend fixing the structural defects. That
    property looked like a great deal, with just some cosmetic
    work to be done. If I had listened to my real estate agent
    I would be in deep trouble. I canceled the contract after
    listening to my home inspector.

    My advice: find the best, most nit-picky home inspector you can.
    Find the guy who loves his job, and loves showing you what the
    problems are and why they are problems, and what should have
    been done instead. Follow him around and ask him questions.
    Get him to talk to you. It is an education. Get him on your team
    and let him know that you want his advice on whether or not
    to buy a property. Buy the right properties, not the lemons.
    Risk mitigation is worth paying for.

    CJ

    • Jason Johnson

      Very true! An inspector saved me from buying 2 duplexes around 400k. The listing was very inaccurate. The sell agent also was full of lies. It was only through the inspection I found major issues with the structure, the roof, and many areas where water had leaked.

  4. george huber

    The first home I purchased (to live in) was a beautiful townhome. Finished very nicely inside. So my real estate agent said “save the $$ on a home inspection, this place is great!”. Well about 1 month after we moved in, the water main into the house started leaking. Turns out it was a known defect for these townhomes and in fact there was a huge lawsuit going on across the country due to failed PVC pipe connections. Polybutylene pipe joint issues. We were without water for about 3-4 days while waiting to get it repaired. We joined a lawsuit regarding the piping joints against Shell Oil and other companies. Got about 1/2 of our money back after paying around $1200 or so to get it fixed.

    The point is, I will never buy a property without having it inspected!

  5. Derek Boykin

    Good quick read.

    I agree that it’s wise to have an independent third party conduct the official inspection.

    In my opinion as an individual skilled in the many facets of home repair and remodeling, I believe as a home owner and or a growing investor it’s very important to know how to look over a property without the need of your contractor or inspector.

    This is important because when your able to better understand the physical aspects of the structure it helps one overcome worry and fear of that may come from the inspectors report.

    Also, it may better position you to make an offer on a property that you otherwise may not have without the developed eye for things that can reduce your acquisition costs that can be remedied for a reasonable amount.

    Additionally I think you should get excited when “red flags” come up on an inspection, as it can always be ammunition to negotiate which means your able to put more money into your improvement budget.

  6. Blake Ramseg

    Brandon, I think you completely overlooked some things which recently cost me on the last “turn key” investment property I purchased in DC.

    1) Yes, the home inspector will generally be able to tell you if something is working but they will not likely tell you the quality. For instance, on the last home I bought the HVAC system was working but I was never told they were the cheapest systems in the world. Within a month I spent 24k replacing them. Lesson: look up he brands and see if they are good quality. It’s worth the quick google search for big ticket items.

    2) The inspector never told me it was unusual for there not to be a gas line. After dealing with the HVAC units, we discovered the previous owner ripped out the gas line to make it easier to pass inspections. I have the ONLY house on the block without gas.

    3) Tankless water heater: I was told they were the best by both the inspector and my agent saving me space plus money. What I wasn’t told: tankless are great for gas but not very efficient with electric. Oh and the tankless water heaters were bought from Walmart! Lesson learned: Check the quality of expensive components of your home. I know these will have to be replaced in the next year.

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