I am a big fan of using the standardized forms in your business. It not only makes your job easier, but it ensures that you get all of the information you need each and every time you inspect a house. It is so easy to get “caught up” talking to the seller, that you forget to note something important.
For instance, one of the things on my form is the number of windows in the house. I cannot tell you how many times I forgot to note this prior to putting this on my form. If you are a wholesaler, you will need to know the exact number of windows that need to be replaced to figure the cost. This number can get to be pretty big if you have a lot of windows.
It can also be pretty easy to walk past the panel box. Sometimes they are on the exterior of the property and other times they are on the interior. Having to put in another panel box and update the electrical in a house is another costly repair you don’t want to overlook.
What doesn’t need to be on this form?
Your Property Inspection Form is for the major repairs. You don’t need to note every receptacle cover and light fixture that needs to be replaced. I put these types of things in my fudge fund. A “fudge fund” is an amount that you include in your repair estimates for these minor things as well as for those “unexpected” expenses that inevitably crop up.
What needs to be on the form?
At the top of my Property Inspection Form I put the property address, and the name and the phone number of the owner and/or the person I am meeting at the property. If I am working with an absentee owner, I still include this information in case I have any problem accessing the property.
Next I list all of the components I want to look at.
1. The Exterior
I typically try to arrive at the property few minutes early and start my inspection on the exterior of the property. So this is what comes first on the form that I use. I will note the construction, and list the (major) individual components such as the roof, gutters, landscaping, foundation and other cement work.
2. The Mechanicals and Structural Components
I list all of the individual components such as the HVAC system, water heater, the sewer and water pipes, interior structural components and such things as the windows and doors.
3. Cosmetics and Room Detail
I have found it easier to go room by room and list the repairs needed. If I come across something that takes more space than what is provided on the front of the form, I just turn it over and write it on the back. Like I said before, you don’t need to list small items. Right now you are worried about the big picture and getting an accurate idea of the cost of repairs for your investor buyer. If in doubt, err on the side of caution and figure a little high. It never works out to underestimate repairs; the investor will figure this out pretty quickly and won’t want to work with you in the future.
What if I’m not an expert on repairs?
One thing I would like to point out is that you don’t need to be an expert on all of these systems and components. In time you will get better and better at figuring the cost of repairs, but a lot of this is just common sense.
If you drive up to the house and the shingles have lost their granules, are curling up, missing or damaged, then you most likely need a roof. The end buyer is not going to want to find out he needs a roof after purchasing this “pretty house” that your investor buyer has rehabbed. So go ahead and figure a roof. Typically, the rehabber is going to install a new roof if there is any doubt.
A lot of times you can tell by looking at the furnace and AC if they are really old. Be sure to look for a green inspection sticker with a date on it on the furnace and water heater. This will tell you how old the item is. Bear in mind that the life expectancy of a gas forced air furnace is about 20 years. If a furnace is older than about 12-14 years old at most, I always figure installing a new furnace in my repair estimates.
If the house has original windows, installing new energy efficient windows is always a selling point. Buyers look for these. Most of the time I will include replacement windows in my repair estimates if the windows are original.
Last but not least
I always try to come up with two sets of figures. I pointed out in my post about using a Property Information Form, that I always figure a total rehab cost and a “to rent” cost of repairs. A landlord may be perfectly fine with an outdated kitchen or bath that is in perfect condition that a rehabber would never consider keeping. He may also keep the appliances and carpet if the house is to be a rental.
I wasn’t always able to do this until I built my buyers list to include buy and hold landlords. Now I have several folks on my list that are very happy with those types of houses.
Do you have a Property Inspection Form?
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I learned about having a proper property inspection form the hard way! Now I know!