Everyone knows that getting a home inspection is extremely important when you are buying a home to live in. But what if you are a real estate investor? Do you still need a home inspection? The answer just may be yes, especially if you are a less experienced investor.
Does Your Investing Strategy Make A Difference?
The answer is, not really. Whether your strategy is “buy and hold” or rehabbing is what you love to do, most real estate investors put an inspection clause in every contract when they are buying a house. This gives you a way out of the deal if something is found that is completely unexpected or that could turn out to be very costly to repair. It also gives the investor a bargaining chip if you need to go back to the seller to adjust your original offer.
Many investors who are planning to flip properties go into the situation (particularly first time flippers) with the idea that they know there are problems are and what the repair costs will be. After all, this is why the house is “so cheap”. They rush in and put an offer on the property without taking the proper steps to determine if this is really a sound investment. This is almost certainly a recipe for disaster.
What About Experience?
An experienced investor can usually walk through the house and get a pretty fair idea of the visible or obvious work that needs to be done. This is a skill that is developed over time.
It is those things that are hidden or are of a very technical nature that usually take a trained inspector to uncover. Very few of us are competent to know if a furnace is operating correctly and safely. Now you may say, this furnace looks like it’s a hundred years old and I know I am going to be replacing it. That’s OK. You can skip the furnace inspection. If the electrical system is going to need to be updated this is a costly item that needs to be figured into the costs to rehab the property. It is certainly something that needs to be taken care of before the cosmetic work begins on the property. These are just few examples of potentially major expenses that can be uncovered in a home inspection.
Be sure not to forget about the pest inspection. Not having already done a pest inspection before finding a retail buyer has derailed more than a few closings when unseen termite damage is discovered by the buyer.
If you are new to real estate investing, one good thing about an inspection is that it will shed some light on the scope of the work that needs to be done on the property. While home inspectors don’t quote prices for repairs, you can get an idea of the amount of money needed to get the house in good working order from the inspection. Having all of the facts can mean the difference in purchasing a property that will that will turn a decent profit or walking away from one that is sure to end up a failure.
Kick Your Emotions to the Street
First and foremost you need to always remember that this is a business. This is no time to fall in love with a particular property and make a decision based on emotions. The bottom line is really the only thing that matters to a savvy investor.
More importantly than any of the things mentioned above, a home inspection can alert you to any potentially hazardous or unsafe conditions in the home that untrained professionals may miss as they walk through the house. These can be particularly troublesome for a buy and hold landlord. Among these could be mold (often hidden), asbestos, lead, carbon monoxide or radon (both colorless and odorless) or even subtle but very serious structural problems that could set you back tens of thousands of dollars.
Whether you realize it or not, a professional home inspection can end up saving you thousands of dollars and even prevent you from having to go through costly litigation involving hazardous situations that may discovered at a later date. In the end, whether or not to have a home inspection when buying investment property is most likely going to be a personal decision based on your areas of expertise and level of experience.
For more information on home inspections you can check out my good friend Allan Davis' site for Elite Home Inspections at: http://www.EliteHomeInspections.net. You will also find informative and some times entertaining videos on this site as well as on Youtube. Check out “Louisville Home Inspector” on this channel.