What inspections are a MUST?

[Brian Nordman]

I'm new to the real estate investing game and there's two properties that I've got my eyes on and it's time to start making some moves on them. One of the properties is a duplex and the other is a 4 plex. I'm good with numbers due to my profession being in public accounting so it's more of the whole buying process that is completely foreign to me. I know that it is a good idea to bring a contractor/inspector with you when getting a showing on a property so they can analyze the property in a way that I can't. But I also know there are endless types of inspections that can be done and so I was hoping I could get some advice on what are the most important ones to have done as well as when in the buying process these inspections are generally done. For example, before or after I've made an offer. Also, if anyone would be willing to give me a rundown of the typical buying process start to finish that would be greatly appreciated! Thank you in advance!

[Matt Schelberg]

For a small multi-family purchase from another landlord, inspections are part of the due diligence phase -- this usually happens after the buyer and seller agree on a price (AKA a purchase agreement or a contract).  The contract will spell out what things are due and when.  To name a few:

• copies of leases
• property inspections
• verifying rents (estoppel certificates)
• security deposits
• seller disclosing outstanding litigation or insurance claims

The contract comes first so that the buyer and seller agree on a framework for a sale before the parties spend lots of time and money on inspections, reviewing documents, bothering tenants with intrusive walk-throughs, etc.  

A home inspector will be able to provide you with a comprehensive look at the property (maybe $450-600 for a 4-unit).  A home inspector is a generalist, and if he has concerns about any particular system (e.g. HVAC, foundation) he may recommend that you bring in a specialist to get an expert opinion.  Definitely accompany the home inspector during the inspection so you have a chance to ask questions.  

Since the offer comes before the inspection period, you should walk the house with someone familiar with evaluating property condition -- an agent, friend, contractor, etc -- before submitting your offer.  This will allow you to identify obvious problems upfront before you drop $500 on an inspection.  It will also help you estimate repairs so your offer amount is inline with your goals for all-in cost.