Should I pay for an inspection or only the contractor?

Question

Michael Haynes · Answer

@Isis Franco, Hello from Tampa. I can't get my head around the idea that Buying houses to Rent and Flip is as easy as you are describing from a distance. It gives me the heebe jeebes. The first house is rented and you have a PM. The pictures look good and its rented and you don't think that you have any repairs to be made until next year? In Tampa? There are so many things wrong with that Business Plan that I don't even want to think about it. And you are buying a Flipper in Orlando with a Contractor you don't even know? What if the Market hits the Wall with the Fed raising the Interest Rate and the Buyers won't pay 5% Mortgages? Then, it turns into a Rental and you haven't even paid for the rehab. Just talking about the Four Point Inspection which is required in order to get Home Owner's Insurance you have to have a clause in your contract to let you out if any problems are found. You don't have eyes on the ground to do your walk through. You don't know the area. You haven't seen the neighbors houses and the conditions there. The numbers work...so what? A roof that is more than ten years old can start leaking at anytime. The pipes under the sinks are always leaking because they are weak plastic fittings that come loose with any bump when the tenant stores stuff under there. The tenants don't call you with a leak as long as it doesn't bother them. Things get wet, they get ruined. Slab construction here in Tampa with an older house means that you have galvanized plumbing in the slab, which lasts about 30 years before the salt in the ground causes them to rust and start pinhole leaks. Houses from 30 years ago had aluminum wires. Lots of them were not grounded and you need all outlets to be grounded to pass the Four Point. HVAC? Good luck if it is an older house which would have window units and need new AC installed. Five year old AC unit? You have the old refrigerant and need to replace the whole unit at any time when it breaks. Home Owners Insurance...good luck. We have the State run Citizens Insurance and fourteen private companies. When we get a direct hit on Miami, from a Hurricane, none of them will have enough savings to cover the damages. You don't want a property in a Flood Zone as the Government has not solved the unsolvable problem with the increasing cost of Flood. Property Taxes just went up here in Tampa the last two years and are projected to continue to go up. My four commercial lots in S. Tampa just doubled in cost. Do you know of Martin Armstrong and his method of predicting Business Cycles? Martin and Harry Dent both predict a steep downtrend this year in the value of everything for the next twenty years as we have a Worldwide Debt problem with no solution in a Deflationary Economy. Here is a link to the video for Martin

https://www.youtube.com/watch?v=yyGKTKSKCiU&t=124s

Gives you the Historical chart to ponder over.

After 30 years as a Landlord in S. Tampa, I know that Houses do not take care of themselves and a PM does not do inspections and repairs. I had one PM send out his AC guy who charged me for a new Compressor and it turned out to be a five year old unit and the PM did not inspect the repair. PM's want 10% of the Rents and charge you for each telephone call, like my lawyer and $100 for each letter. I bought two duplexes from an owner who had not gone by to even look at them for ten years. That was at a time when we could afford a Handyman who was able to do any repair at an Hourly rate. Now, you have to have your Team of individual, licensed, contractors who can charge you a hundred dollars an hour to go to Home Depot to get the parts and a big flat rate for the whole repair...when they have the time. My AC guy hasn't called me back for a week to recharge the unit that I just installed. The first night after the installation, the new neighbors were moving in. The guys came over at midnight with a handcart and cut the gas lines in order to steal the outside compressor for scrap! The neighbors son saw the whole thing and these neighbors went across the street and over the fence and checked out the other house with a For Sale sign. You really want to be an Absentee Owner and start a Portfolio of Rentals in different Cities in States that are three hours flying time from you home? Talk about rubbing a cat the wrong way...

Colin G Murphy · Answer

Hi @Isis Franco

I would recommend you at least get a 4 point from a licensed inspector. That should set you back about $100 and will provide accurate information on the age and estimated useful remaining life of the roof, plumbing, electrics and HVAC. For example, there is a big difference between having a 5 and 15 year old roof.

A contractor won´t necessarily notice any of that stuff, especially if they are focusing on cosmetic updates to kitchens, bathrooms and floors.

Timothy W. · Answer

Isis,

I've never paid for an inspection...because I had over a decade experience in construction, property insurance claims and landlording and I was my own boots on the ground, inspecting the properties.  I did finally get an inspecting license when I started hearing what guys were charging for it.  I figured why not.

I do verbal "walk throughs" with investors for $100 (over the phone with out of state investors), when they don't want to do the whole retail inspection.  Other inspectors do it too, I believe.  It is not a true "inspection" in that it does not generate a written report - but it is third party eyes on the structure.  In other words I'm not selling you construction services while "reporting" what I find.  It's an option.  4 points are what an insurance underwriter would use for property insurance because they are the 4 most vulnerable points of insurable damage but a 4 point is 4 things - heating, plumbing, electrical, roof.   You could go either route and both cost the same but the 4 point will not address anything out of those 4 "points".  It could be that your insurance company will order a 4 point anyway and will let you know what they see.  If I can help with anything, let me know.

Here's a sample of one: https://www.nachi.org/documents/4pointsampler.pdf.

Keric Allen · Answer

Paint and caulk can go a long way when it comes to making a house look good in pictures. I always get and recommend a property inspection. 300$ to identify a $10,000 problem is well worth it. Who knows, this property may have 0 issues but eventually you will come across a property that "looked good" in pictures yet had some major issues. Protect your money by inspecting the property and using that report to renegotiate the price of the house or have the seller fix the issues! Good luck.

Mark Gallagher · Answer

Hi @Isis Franco

It comes down to what makes you comfortable and able to sleep at night.

I've never had an inspection on any property I've purchased. Given the property is already lived in, you might be better off asking the tenant what's wrong with the house. I'm sure they'll give you a laundry list of items. In those areas of Florida you're probably buying houses on slab with public water and sewer, which erases some of the biggest issues you'd want to get inspected.

Michael Lee · Answer

Hello and welcome to BP!  Everything is negotiable but whoever pays for the inspector works for.  Why would the seller ever hire an inspector by choice.  It is usually requested and paid for by the buyer.  The would be the party that has something to buy or walk away.  The buyer would have more ambition to order than the seller.

Good luck to you!

Should I pay for an inspection or only the contractor?

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