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Updated almost 9 years ago,
Turnkey - Inspections
Hello BP!
This is a question coming from a real estate brokerage that sells investment properties. Some people would call us a "turnkey provider". anyways, this topic has come up many times in office meetings ( aka our office manager made me post this :) We figured that this had to be a common bump in the road for many buying or selling a turnkey product.
Sooo.. when we sell properties it typically works like this: We acquire, rehab and then rent the property. Then, we offer it for sale. Once its under contract our buyer will typically order an inspection (most get inspections, some don't..)
Here is the problem: Tenants don't like to deal with inspections, appraisers and contractors when they first move into a house. Sometimes its not an issue but sometimes it can really be difficult to schedule and can also be an awkward conversation trying to explain why all these people need to get in the property. Also, when / if the tenants do get annoyed with all the people going in and out AND they over hear the inspector pointing out flaws in the house they start thinking they have "ammunition" against the property manager and it can get ugly. or just annoying.
Possible solution: We buy the property, rehab the house, the get the inspection on our own dime... Then rent the property, then offer for sale. That way we have the inspection and a list of items we will repair up front to show the buyers. This solves the tenant problem partially at least... still will need contractors to come in and do the repairs and have an appraisal done.
If we take it one or 2 steps further we could everything done before placing a tenant.
However, as a TK buyer its obviously nice to have a cash flowing property right from the start. Especially with financing in place. In our experience the first few months of that kind of relationship can set the tone for working with each other well into the future.
Another problem: If the turnkey provider orders and pays for the inspection, doesn't that make it look like they are trying to hide something or somehow being non-transparent..?
When buying and selling rented and performing properties what is the ideal order of operations...
- Rent, sell, inspect
- Inspect, sell, rent
and why?
Feedback would be awesome from buyers and providers! Thanks BP!