What am I looking for when I see a property?!

Question

Hello all!

I've been doing research and saving money for months now, and a chance encounter with a Real Estate agent lit a fire under me. I now have an MLS search set up and a loan broker. My prequal is done, and I'm about to go see two different homes. Strategy is buy and hold multi family. I've done rental analysis on both properties and they both look promising. House-hacking, using FHA loans to finance the property. Both properties clearly need rehab (so potentially 203k), so my question is what am I looking for when I see the property?

This is what I know I'll do:

Take tons of pictures

Test faucets, lights

See the attic and basement/ crawl space

Take pictures of any floor damage, wall damage, or ceiling damage

The owners are selling as-is. Does this mean I can't ask them questions about potential big-ticket issues? Am I missing anything? How many people should I bring along? Do I need a contractor with me?

Any advice would be amazing. I'm very excited!

Matthew Porcaro · Answer

If they're selling it 'as-is', when you offer on the property you are essentially waiving that you are offering without any contingencies. Unless you try to submit an offer with inspection contingencies, but chances are they will immediately reject it.

Most crucial things to look for are:

• Condition of the mechanical, electrical and plumbing systems. "checking the lights" isn't going to tell you if the system is up to code, or if the electrical service is relatively up to date. Plumbing you can't really do too much other than checking the water main coming into the house and check the date on the boiler.  
• Structural components - check for cracks/water in the foundation. Also in the basement, check the floor joists and supports. Check spot and record any water or mold you see anywhere in the house. 
• Roof/exterior. Look at the roof, usually just by looking at it you know if it needs to be replaced. Do you see any rotting in the sofits/fascias?

I would bring someone who knows what they're doing from a construction standpoint. An inspector is the only way to be close to sure, but obviously they cost money.

Understand how much cost the rehab will be, and be aware that in order for you to be approved for the 203k, the appraised value after work done needs to be more than the loan amount. So if the repairs are more than you'll get out of the home, you will be denied.

Senthil N. · Answer

Don't hold yourself back even if it appears you should, such as asking questions.  The worst thing that can happen is not get an answer.  If this is new endeavour, I would suggest you start with something that does not require a whole lot of work in my opinion.  Make allowances for additional cost and time as it is likely to happen.  As far as home inspection goes, yes you may take a contractor with you.   There are home inspection check lists on the internet you can work off of as well.  It is not feasible to look at everything in the house in a short time.   So if you plan to do a through check you will have to plan it out with the owner.   However they key items are things like obvious water damages, condition of the roof, appliances, foundation (look for angled cracks on the walls), etc.  And then there are obvious items like carpet, walls, bathroom, window condition, etc.   Eventually a full inspection will do you good as you can fix everything in one sweep and don't have to worry finding new repairs along the way.  Price out all repairs when negotiating.  Hope that helps.

Jay J. · Answer

Welcome. You have already set yourself up for success by joining BiggerPockets!!

After you're done reading what @Ayodeji Kuponiyi mentioned,

1. Learn the basics --> http://www.biggerpockets.com/starthere2. Then, download the BiggerPockets Ultimate Beginner's Guide and start reading some more!!The UBG will will walk through many of the key topics of real estate investing. Ask anyone here, its an invaluable resource.  -->  https://www.biggerpockets.com/real-estate-investin...3. Once that's done, get to listening to the free BiggerPockets Podcast - A really great podcast with interviews and a ton of great advice. -->  https://www.biggerpockets.com/renewsblog/category/...4. Now you're ready to face the RE world !!  GO GET IT!!

Ayodeji Kuponiyi · Answer

@Mark Rustin perhaps this will be helpful: https://www.biggerpockets.com/renewsblog/2013/02/2... and/or https://www.biggerpockets.com/renewsblog/2013/04/0...

Best of luck!

Evelyn Roper · Answer

Good advice above!  One thing I wanted to add was that although your offer may be rejected if you require a home inspection, you can still ask for one.  I have bought a home "as-is" and did get an inspection done before we finalized the Closing.  It all depends on how motivated the seller is and whether or not they have multiple offers.

JD Martin · Answer

@Matthew Porcaro hit on it. If you are unfamiliar with mechanical and structural systems you should bring someone knowledgeable with you. Things I immediately look at/for:

• Heating/AC system: up to date? Central? Working properly?
• Electrical system: up to date? Properly sized breaker panel or fuse panel (yes, fuses are still OK).
• Plumbing: Are supply pipes non-galvanized (copper, plastic, poly)? Are drain pipes plastic, cast iron, galvanized (ugh), clay (yes I've seen this!)?
• Roof: Is it obviously worn/failing?
• Foundation: Anything that appears to be shifting? Structural cracks?
• Joists/trusses/subfloors: Broken, sagging, missing, spliced, rotted?
• Flooding: Any evidence? Mold? Soaked basement? Caused by clogged gutters or improper grading?
• Windows: All there? Condition?
• Siding: Good condition? Vinyl, asbestos, hardiboard, stucco?

If the property makes it past all/most of these things (I have a good idea what it costs to fix all of them), you are in the home stretch. Most any property is going to need cosmetics, and the depth of which will play a big part in what you should offer for the house. Just because a house has good structural issues won't make it necessarily a good deal - if all the cosmetics are trashed, it will cost a fortune. Similarly, a house that has been redone but has a failing foundation or flooding problems can cost a lot of money to fix. I walked away from a house a few months ago that had a lot of possibility but also had a decent-sized sinkhole appearing stradling the driveway and garage.

PS: A lot of these things you can get a feel from with good pictures before you ever set foot in a house, once you know what you are looking for. You still need to be there in person, but it can cut down on the number of dead ends you chase.

Mark Rustin · Answer

@Senthil N. @Matthew Porcaro @Jd Martin @Evelyn Roper

Thank you all so much for the really useful advice. I'm so antsy to see my first property, I've looked at hundreds online. So close i can taste it. I am a practicing architect, so I think I have at least the flavor of what I'm looking for in the MEP systems, even though I've never done residential work.

I contacted my old landlord, who is a very active real estate investor and asked him if he knew any contractors or inspectors who would be willing to walk the property with me on a first viewing. He gave me a few names and numbers.

Also I found out one of the properties is corporate owned, which from what I read means they'll probably be more willing to move forward with a 203k loan.

I'll keep everyone updated on my progress!

Jacob Anderson · Answer

I also agree that if you don't have the knowledge, that you should bring someone who can look at the house repairs with an experienced eye.

Jacob Anderson · Answer

Great info from @Ayodeji Kuponiyi and @Jay J.

Best of luck

What am I looking for when I see a property?!

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