Posts Tagged ‘property’
Conduct a Residential Property Inspection
Part of due diligence for profitable real estate investments is property inspection. A 20/20 understanding of property condition eliminates the risk of making costly mistakes and bolsters your negotiating leverage.
Meet the Decision Maker
Assuming you are evaluating a property to purchase, conduct the inspection with whomever can make the decision to sell, usually the owner. Inspecting with the decision-maker develops rapport and ensures a mutual understanding of the condition. Surprisingly, many owners are not aware of the true condition of their property; on the other hand, others may inform you about problems that are not readily apparent.
Prior to meeting, ask the seller to bring a copies of the deed, survey, tax bill, leases, and receipts for any major work on the property. These documents will familiarize you with the property; moreover, the search of the same will cause the seller to invest time in the negotiation. The more time invested, the more they will want to reach an agreement-nobody wants to invest time for nothing.
Inspection Tools
For a thorough inspection, you need the proper tools. Your inspection toolbag might include: a cro-bar, binoculars, electrical tester, camera, tape measure, flashlight, extra batteries, sandwich bag, clipboard, square, purchase contracts, cordless drill, marble, and probe (screwdriver).
1) Exterior Inspection
Begin with an exterior assessment. With clipboard and pad, record impressions about neighboring property, driveways, walkways, stairways, and handicap access. Note the parking situation, grading, and landscaping. Inspect the condition of exterior walls, doors, and windows. Use your binoculars to check the roof, or if possible inspect it close-up. Is it cracking or thick with too many layers? Are the gutters and downspouts in good condition? Water is destructive, so pay attention to drainage. Look for soggy conditions, peeling paint, cracking mortar, algae and mildew.
2) Major Systems Inspection
The basement is one of the most telling parts of a property. From there, begin assessing the major systems. Inspect the foundation by studying the exterior walls for sandy, cracked, or deteriorated mortar. To find air leaks, look for cobwebs-spiders spin them near openings to prey upon insects who enter from outside. Explain this entomology lesson to the seller as you pick at those energy inefficient cracks. Check the sump for water which indicates leakage. Water attracts termites, so use your screwdriver to probe joists for rotten wood.
Take notes about the heating and cooling systems. Try to find a date on the furnace or boiler, and on the hot water heater. Look for maintenance records and read the entries. Pay attention to the plumbing. Copper and plastic pipes resist corrosion, unlike galvanized pipes which corrode and crack. Check to see if the electrical system has been upgraded from fuses to circuit breakers. Read the main breaker to learn the amperage (e.g. 110, 220.) The more amperage, the more capacity for amenities. Also, investigate the exhaust duct work from the furnace and hot water heater. Poor connections and soot indicate dangerous, possibly fatal carbon-monoxide leaks.
3) Living Area Inspection
Next, inspect the living area. Check for an alarm system and smoke detectors. Note the smell-it can affect value. Tally the number of bedrooms and bathrooms. (According to FHA, a “bedroom” is not a bedroom if you must walk through it to access another room.) Many older homes lack closet space, so make note. Inspect the composition and condition of floors and walls. Test all windows and doors for ease of use. Also check that all electrical sockets are grounded (three prong) and functional (you can use an inexpensive electrical tester.)
A large part of any home’s appeal is determined by the quality of its kitchen and bathrooms. In the upstairs bathroom, simultaneously flush the toilet and run the sink and shower to test water pressure. Make special note of updates, exhaust fans, storage space, and other amenities such as washer, drier, jacuzzi, etc.
Beside all of your inspection assessments, estimate costs of repair. For help, consult with a general contractor or simply pick up an R.S. Means construction cost guide from the hardware store.
Presenting the Inspection Report
Once you have fully evaluated your inspection data, you can use the various “value-deficiencies” to leverage your case. Remember however, even neglectful owners grow attached to real estate and can be easily offended. Yes, properties in less-than-retail condition should sell for less than retail. Notwithstanding, defects should be presented in a friendly, helpful way. Make it your mission to help the seller find the value of the property. To add credibility and maximize your negotiating potential, enhance your findings with an inspection by an independent third-party.
Concluding Carefully
Although property condition affects value, a profitable transaction is determined by cash flow or equity. Money can fix even the worst looking property. Make your decision based on the numbers, not the condition.
Author: Ian Parrish
Mr. Inside Out thoroughly inspects all major components of the subject property to expose unknown defects and advise you of future maintenance about your home once the purchase is complete.
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Buy an Investment Property
With the current state of our economy, it is no surprise that more and more buyers are considering purchasing an investment property. With the real estate prices dropping steadily, it is more tempting than ever to jump into the real estate investment game. But before you go out and buy an investment property, there are a few things you should keep in mind.
The first thing you need to consider is the type of investment property you are interested in. Are you looking for a fixer upper that you will flip for a quick sale or are you more interested in a rental property. Both have their merits and both have their short comings. If you are looking for a flip, you will need to find a property well below market value which is in need of only cosmetics updates. You will need to be very careful in budgeting the renovations as they tend to take longer and cost more than originally planned. When it comes to rental properties, you must once again be careful to buy something that offers you good rents to cover the mortgage, taxes, upkeep, etc.
As with buying an owner-occupied home, before buying an investment property you need to understand the real estate market dynamics in your selected area. Location is very important in purchasing investment properties, almost more so than in buying your own home. Even though you may have lived in a particular area for a very long time, make sure you look at its potential from an investment standpoint. Do your research whether you are considering a neighborhood or area you know well or a new market. Most towns and cities will have areas that are more desirable than others so try to keep in mind specific postal codes, average median income, sale price of homes, schools, shopping, and any other factor that may impact on your investment property.
Enlisting the help of a real estate professional will save your time and aggravation. Try to choose a real estate professional with experience in investment properties. This person will have invaluable information to help you make the right decision. They will be your eyes and ears when searching for the perfect investment property. They will also have access to comparative material to help you review prices and rents.
You may also want to have a hard look at your finances before embarking on a real estate investment adventure.You will need to have a good credit rating and or collaterals as well as a substantial down payment to purchase an investment property, particularly one that is a rental property.You may also need to make cosmetics or mechanical repairs to the home before being able to flip it or rent it out. Make sure you are aware of the type of investment needed to bring the property up to date for a quick sell or to bring it up to acceptable living standards to attract great renters.
Real estate investment is a challenging and rewarding business. Those who do it are often addicted to it. However, the rewards may be great for certain investors, there are also a number of them of fail. Careful planning and number crunching with the help of a good real estate professional will help you choose the type of real estate investment that’s right for you.
Author: Yannick Picard
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