Are you at the point in your real estate wholesaling business where you need to know how to do a property inspection? Are you wondering what that even means? Well this post should clarify things and get you on your way to doing an awesome property inspection.
What is a Property Inspection?
A Property inspection can mean different things to different people. If we were Realturds, then we would refer to this as a 4 hour drill down on the property, searching every nook and cranny for ANYTHING that could possible be wrong with the house. I like to think of that type of inspection a deal killer. That’s not what OUR property inspections are.
In the eyes of a real estate wholesaler, a property inspection is an in person meeting where you do a walk through of the property, checking out some important facts and taking LOT of photos (even a video if you’re in top of it).
Your property inspection should last about 15-30 minutes. If the seller is there with you, then asking questions about updates/repairs to the house will be helpful. They can offer alot of insight bout the age of roof, Air conditioning, Plumbing, additions that were done without permits, foundation issues, driveway cracks and more!
When is a Property Inspection Needed?
This is where alot of people fail miserably. Some real estate investors never do a property inspection! HOW CAN YOU MAKE AN INTELLIGENT OFFER WITHOUT SEEING THE HOUSE? The answer is:
As a wholesaler, your job is to provide deals with enough equity that your cash buyer will be able to make a profit on the deal. PROFIT will come to your cash buyer once he has purchased the house, made the repairs, and then sold the house to a retail buyer. Important factor : MADE REPAIRS!
When you’re talking to sellers, they’ll tell you that the house needs some paint and carpet. You can’t believe that for a second. They have no idea what repairs might be needed to put the house in retail condition. That’s for YOU (the professional) to decide.
And that’s why you need to do a property inspection.
How To Do A Property Inspection
You’re going to look at everything! Start with curb appeal and work your way around the entire outside and inside of the house. Keep your eyes out for any obvious repairs that are needed. Check the 4 major components of every house:
Roof : [Interior] Are there water stains on the ceiling?
Are there any existing leaks? Is there any drywall or insulation that has fallen onto the floor?
[Exterior] Are the shingle curling up on the edges? Is there a tarp on the roof?] When was the roof replaced?
NOTE: It’s common for sellers to sell the house when the roof needs replacing, because they cant’ afford to replace it. (Roofs aren’t cheap and once they need replacing, it goes downhill fast).
Plumbing: What type of plumbing does the house have? Galvenized (silver pipes) is the oldest type of plumbing and needs to be replaced. Copper (gold pipes) is better than galvenized but still has issues. Could possibly need replacing depending on the age. CPVC is the best type of plumbing.
Does the seller have buckets under the sink? Be sure to check! This will indicate a plumbing leak that needs to be repaired/replaced.
Heat/Air: What is customary in your area for heat / AC? Check the system out to see if it works. In Florida, we MUST have central heating and air – and alot of times the outside unit has been stolen. The outside unit is expensive, so you want to factor that in when calculating rehab costs.
Electrical: Check the electrical panel and see if its a 200 amp panel. If so, that’s the best choice and you wouldn’t need an electrical upgrade. Make notes on your inspection report about what you find here, and if you’re unsure if it needs replacing then consider that it DOES!
Take a ton of photos: There’s no such thing as too many photos. The photos of a property can ALMOST tell the story. So the more you take, the better your odds are of generating interest to your cash buyers.
What do you need photos of? Here’s a checklist for you:
Front of the house
Back of the house
Sides of the house
- Living Room
- Kitchen (cabinets/countertops) (from several angles)
Bathrooms (from several angles)
any and ALL obvious damage that you see
Windows (not all of them but a few, especially if theyre broken or damaged)
Air conditioning unit (inside and out)
hot water heater
How am I supposed to Estimate Repair Costs?
This is where you can either make the deal amazing for your buyers, or really mess it up good. It’s hard to get this perfect, because everyone does rehabs differently, and their costs to make a house beautiful will vary. Some rehabbers do “band aid” rehabs, where they just add paint and carpet to make the house presentable enough to sell to a first time homeowner. Others will replace EVERYTHING and make it a brand new home. It’s not your job to determine what your buyer will do.
I have a rule of thumb when estimating repairs and filling out my inspection sheet. If the house is in a neighborhood that has retail sales, and the comps are solid, then I’ll assume that everything will be replaced. This will bring top dollar in the back end sale for your rehab buyer.
Determining how much that will cost is a challenge for some people, especially if you’re new to the business. If you get it wrong, it could destroy your deal. Believe me, I see ALOT of people get it wrong.