Home Inspection

Investing in real estate can be a lucrative venture, but it also involves considerable risk. By their nature, rental properties come with associated costs and maintenance. Sometimes maintenance costs are low, however, there are also big-ticket costs that can lead to excessive costs. When these costs come up unexpectedly, they can completely ruin an investment’s budget and profitability. One way to protect yourself and your investment is to get a home inspection before signing an unconditional contract.

Buying a rental property requires due diligence, and a home inspection is a crucial part of this process. A home inspection can reveal potential issues with a property that could impact its value, cost you money in repairs, or even make it unsuitable for rental or resale.

As an investor, you must know the condition of your property before buying. Unless you’re already highly skilled in construction and real estate investing, getting a home inspection shouldn’t be negotiable on your real estate purchase. A home inspection is the best way to ensure that the house is in good shape and that any potential issues are addressed before closing.

What is a home inspection?

A home inspection is a comprehensive evaluation of an investment property’s structural and mechanical systems. A home inspection should be carried out by a certified home inspector, not just a standard contractor. Professional home inspectors are trained and licensed by their state to identify any issues or potential problems in a property. Furthermore, inspectors should have an intimate knowledge of local building codes to identify when certain structural requirements are unmet.

A home inspection aims to find issues and potentially costly problems with a property. These problems can include structural defects, plumbing problems, faulty or outdated electrical wiring, and much more. Your general home inspector will also take a look at the property’s HVAC system, roof, visible foundation, visible insulation, and other key features of the property that can affect value, functionality, and safety.

When do you get a home inspection?

Most often, property investors get a home inspection when buying an asset. It helps them decide whether or not they want to move forward with the acquisition or if they need to negotiate a lower purchase price or repairs. If they have an inspection contingency in their contract, it can also give them the option to back out of the purchase entirely.

Home inspections can also be helpful for property owners who are getting ready to sell their property. Before listing an asset on the market, an inspection can help identify potential problems in the property before a buyer’s inspection uncovers them. This is helpful for sellers because it gives them more time and flexibility to make the necessary repairs in the most economical and efficient way. Unfortunately, when sellers are put in a position where they have to quickly make repairs or renegotiate the purchase price due to problems on an inspection report, it often costs them more money than if they were to have had more time.

What does a home inspector look at?

A professional home inspector is your partner in this venture – equipped with expertise and ready to identify potential material defects that could potentially cost you time, money, or both. They look for everything from small material defects to serious property problems. Here are the main areas a general home inspector will cover in their report:

1. Structural: an inspector will visually inspect the framing, foundation, and roof structure to look for damage or deterioration. Furthermore, they check to make sure structural components meet local building codes.
2. Exterior: They will evaluate the condition of siding, windows, doors, and other features to ensure they are correctly installed and maintained.
3. Roof: The inspector will check roof covering, gutters, and downspouts for signs of damage, rot, or wear. They will also check the attic for proper ventilation and insulation.
4. HVAC: Home inspectors will check the heating and cooling system. They’ll ensure it’s functioning properly and may recommend repairs or maintenance if necessary.
5. Plumbing: Property inspectors will evaluate the visible plumbing system, looking for leaks or damage. They can only inspect what is readily visible.
6. Electrical: Inspectors will examine the electrical panel and wiring to ensure they are up to code, functioning, and devoid of faulty wiring.
7. Appliances: The inspector may check the condition and operation of appliances included in the property sale.
8. Safety features: The inspector will check to see if smoke, carbon monoxide detectors, and other safety features are present on the property.

While a general home inspector will look at these areas, depending on the property you are looking to buy, it might be pertinent to order specialized home inspections as well.

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Why is a home inspection necessary when buying a rental property?

Home inspections are just as important when buying an investment property as when buying a personal residence. There are several reasons why a home inspection is critical when buying a rental property:

• Identifying potential problems: A home inspection can reveal any existing or potential issues with the property. These could include leaking roofs, faulty electrical wiring, or plumbing problems. Identifying these issues before investing can save you money in the long run and help you make an informed decision about whether or not to purchase the property.
• Budgeting for repairs: If the inspection reveals any issues, you can use the report to budget for repairs. Knowing the potential cost of repairs can help you negotiate the purchase price or make a more informed decision about whether the investment is worth it.
• Ensuring the property is up to code: A home inspection can ensure that the property meets all building codes and safety standards. If the property doesn’t meet these standards, you may need costly upgrades or repairs to bring it up to code.
• Protecting your investment: A home inspection can help protect your investment by ensuring the property is safe, functional, and valuable. By identifying potential issues upfront, you can avoid costly repairs and ensure your investment is profitable.

The different types of home inspections.

While it’s great to get a general home inspection, you might need to engage specialist inspectors. While a general inspection will cover most areas of a property, various specialized inspections can provide more detailed information. 

Foundation Inspection

A foundation inspection is a comprehensive examination of a property’s foundation, walls, floors, and roof. This inspection aims to identify any structural defects, including cracks, shifting, settling, or bowing of walls. Structural inspections are recommended for older properties or those located in areas prone to natural disasters, particularly in areas that experience earthquakes. It’s also a good idea if the general inspector notes any discrepancies in the floor or roof level.

Pest Inspection

A pest inspection, also called a termite inspection, is a visual inspection of a property for evidence of pest infestation. Pests like termites, rodents, and insects can cause significant damage to a property that can go unseen for years, and an inspection can help identify any signs of infestation. Pest inspections are especially important for homes and buildings located in areas with high pest activity.

Environmental Inspection

Environmental inspections are conducted to identify any environmental hazards on a property. These hazards may include lead-based paint, asbestos, mold, radon, or other pollutants. Environmental inspections are crucial for buildings constructed before the 1980s, when asbestos and lead-based paint were commonly used in construction.

Roof Inspection

A roof inspection examines the condition of a property’s roof to identify any damage, leaks, or other issues. Roofs are exposed to harsh weather conditions and may sustain damage over time. A roof inspection is especially important for homes and buildings located in areas with high rainfall, snowfall, or high winds. It’s also important for structures with unique roofs, like flat roofs, as they can be particularly expensive to repair.

Plumbing Inspection

A plumbing inspection assesses the condition of a property’s plumbing system, including pipes, fixtures, and drains. A specialized plumbing inspection can identify any leaks, blockages, or other problems with the plumbing system. These inspectors take a closer look at plumbing concerns than general home inspectors.

Electrical Inspection

An electrical inspection evaluates the property’s electrical system, including wiring, outlets, and electrical panels. Electrical inspections can identify hazards such as faulty wiring, overloading, or outdated electrical panels. Therefore, electrical inspections are crucial for older properties or those with potentially outdated electrical systems.

HVAC Inspection

An HVAC inspection examines the condition of a property’s heating, ventilation, and air conditioning system. An HVAC inspection can identify any issues with the system, including malfunctioning units, leaks, or blockages.

Why you need a professional investment property real estate agent when buying a rental property.

Engaging a property inspector is a critical component of a successful real estate investment acquisition, however, they aren’t the only professional you should use. The most successful real estate agents know that leveraging the knowledge of professionals is what helps them make the smartest investment decisions. In addition, they understand the value that an investment property real estate agent provides throughout the transaction process.

For example, when you hire a home inspector, you can gather only so much information from their report without past experience. Investment property real estate agents like the team members at Oak Avenue have years of experience and have reviewed hundreds, if not thousands of inspection reports throughout their careers. These agents can help buyers understand what items they should be most concerned about on inspection reports and which can be easily addressed. It’s their job to help fill in the knowledge gaps of buyers so they can make sound investment decisions that help them build their real estate portfolios.

Other key benefits you get when you hire a professional investment property real estate agent are:

• Experience and Knowledge: A professional investment property real estate agent has extensive knowledge and experience in the real estate industry. They have a deep understanding of the local real estate market, property values, and trends. This expertise can help you identify the best investment opportunities, assess risks, and negotiate the best deals.
• Access to On and Off-Market Properties: Real estate agents have access to properties on the MLS and those not listed on public websites or available to the general public. This gives them a competitive advantage in finding the best investment opportunities and deals. They can identify off-market properties that meet your investment criteria and help you access them.
• Extensive Professional Network: A professional investment property real estate agent has a network of professionals they can tap into to provide you with valuable insights and resources. For example, if you are not already connected with a home inspector, your agent can provide you with a list of referrals to professionals they have had positive experiences working with. They can also connect you with other professionals like property managers, lenders, and contractors.
• Negotiating Skills: An asking price doesn’t need a purchase price. Negotiating the best deal is crucial when buying a rental property. An investment property real estate agent has strong negotiation skills and can help you get the best price for your investment, which will help you earn the strongest returns. They can also guide you through negotiating favorable terms and conditions, like a home inspection contingency, to protect your investment.

The final benefit of a real estate agent specializing in investments is that they help you save time and money in the long run. Time is money, and often the longer you spend looking for the right investment, the more of your valuable man hours you’re investing, which is a cost that many investors don’t consider. More importantly, an experienced investment property real estate agent will help you avoid costly mistakes. A professional agent can provide you with the expertise, knowledge, and resources you need to make informed investment decisions and achieve your investment goals. So, if you’re looking to invest in real estate, be sure to engage the services of a professional investment property real estate agent like Oak Avenue.

The process of getting a home inspection on a rental property.

Once you accept an offer on a home inspection, it’s time to order your home inspection. Most inspection contingencies provide for a limited time for inspections to be completed. Here’s what you can expect from the process of getting a home inspection on an investment property.

Step one: Find a qualified inspector.

Ideally, you’ve already found a licensed home inspector before placing an offer. However, if you haven’t, your first contact should be your investment property real estate agent, who will provide you with a curated list of referrals. Look for inspectors who are certified by a professional association such as the American Society of Home Inspectors (ASHI), the National Association of Home Inspectors (NAHI), or the International Association of Certified Home Inspectors (InterNACHI).

Step two: Schedule the inspection.

Once you’ve found a qualified inspector, schedule the inspection at a convenient time for both you and the seller. It’s important to be present during the inspection to ask any questions and see any issues first-hand. The inspection can take anywhere from two to four hours, depending on the size and complexity of the property.

Step three: Review the inspection report

After the inspection, the inspector will provide you with a detailed report outlining any issues or concerns they identified during the inspection. This report should include a summary of the property’s condition and specific details about any defects or potential issues. Review the report carefully and note any issues that may require further attention. Reviewing this report with your investment property real estate agent is helpful, so they can also provide their feedback. After reviewing this report, you may need to order additional specialized inspections, so it’s important not to delay your inspection review.

Step four: Negotiate repairs or credits

If the inspection report reveals any significant issues with the property, you may want to negotiate repairs or credits with the seller before proceeding with the purchase. Depending on the severity of the problems, you may be able to negotiate a lower purchase price, credit towards repairs, or require the seller to fix the issues before closing.

Step five: Follow up on repairs

If you negotiate repairs or credits with the seller, it’s important to follow up and ensure the repairs are completed to your satisfaction. Your investment property real estate agent will be able to guide you through this process. You may want to schedule a follow-up inspection to verify that the issues have been resolved and that the property is in good condition.

Red flags to keep your eye out for in a home inspection.

Not all problems are created equal, and some issues may be more significant than others – here are some red flags to look out for in a home inspection:

Signs of Major Water Damage

Water damage is a significant concern and can cause significant damage to a home. Look for signs of water damage, including stains on walls or ceilings, musty odors, or warped flooring. Also, check for water stains around windows or doors and in the basement or crawlspace.

Foundation Cracks

Cracks in a home’s foundation can indicate significant structural issues. Cracks can occur due to shifting soil, poor construction, or other factors. Look for cracks in the foundation walls or floor and any unevenness in the floors or walls.

Aged Roofing

An aging roof is a red flag, and it can be costly to replace. Look for missing or broken shingles, signs of leaking, or wear and tear. If the roof is more than 15 years old, it may be time for repairs or even a replacement.

Faulty Electrical Wiring

Electrical issues can be dangerous and costly to repair. Look for outdated wiring, exposed wires, or outlets that do not work. Also, check for any electrical panels that may need to be fixed or updated.

Rotting Decking

Decks can be a great addition to a home but can also be a hazard if not appropriately maintained. Look for signs of rotting or decay in the decking or support structure, including soft spots, sagging, or loose boards.

Galvanized Pipes

Galvanized pipes were commonly used in homes built before the 1960s. Over time, these pipes can corrode and cause water flow issues, low water pressure, and leaks. Look for signs of corrosion, including discolored water or stains on ceilings or walls.

Drainage Issues

Poor drainage can lead to water damage, foundation issues, and even health hazards. Look for standing water in the yard or basement, clogged gutters, or improper drainage around the property.

Mold

Mold is a significant health hazard and can be expensive to remediate. Look for signs of mold, including musty odors, visible growth, or water stains on walls or ceilings.

A home inspection is worth the cost and can save your investment.

When buying a rental property, it is essential to get a home inspection. Investing in real estate is a crucial step in the due diligence process. The inspection can reveal potential safety hazards, estimate repair costs, and identify hidden defects or structural issues that may impact the property’s value and rental income potential. While it might seem tempting to save money and forgo a comprehensive inspection, these short-term savings could lead to long-term costs that eat up returns. Real estate investors need to have a clear understanding of the asset they are buying and its potential upcoming costs.