How to choose what to repair from inspection report

Question

I know that a lot of investors don't bother to repair a lot of the problems found in an inspection report. But how do you choose what to address and what not to? When I talk with the inspectors, naturally they tend to suggest repairing everything. As a buy and hold investor, my instinct is to address all problems in property that I acquire, but is that just wasting dollars?

I'm asking myself this very question again with a property I have under contract. Here is a link to the inspection report: https://dl.dropboxusercontent.com/u/105466347/insp...

It's a really long list, and I don't expect folks here to read through it all. But I'm curious if some of you could point out examples of items you would explicitly not bother repairing. (Note that the repair summary starts on page 56 of the pdf)

Thanks, Rob

Account Closed · Answer

@Rob Condy That's a long list!  Is this a house you're buying or one you're  selling?  If the latter, was this a rehab?  Unless being sold "as is" and priced accordingly, most of these items should have been addressed prior to listing.

As a general rule, I try to classify inspection report items as either "repairs" or "improvements".  I tend to make every repair but not necessarily every improvement. So for example, I would fix things that are broken but I wouldn't necessarily remove trees.  If the report only contained "improvements" the seller would be in a much stronger position. Of course, everything is negotiable and money can always be offered in lieu of repairs.

Brandon Hall · Answer

Account Closed nailed it. Aside from determining what you must do to make the property livable and comfortable, you should go through (with a CPA) and determine what will be classified as repairs vs. improvements. You will then want to understand how you can strategically manage "improvements" in order to have them meet the definition of a "repair."

The reason for doing this revolves around taxes. Repairs are currently deductible, whereas improvements are capitalized and depreciated. Since a dollar is worth more today than it is tomorrow, we tend to want to repair things rather than improve, as repairs save my me money today, rather than a small amount over 27.5 years.

Jerry Bruckenheimer · Answer

Hi, good inspection except for the "viewed roof from ground" I really dislike that, get up there and walk around, tell me if feels spongy, eyeball it up close!

If I had to make a list it starts with items marked:

Safety

Rot

Leaks

Major Repair (Subfloor)

As you go through these, the tools are out, tick off minor other issues as you are working in the area.

Rob C. · Answer

Thanks @John Weidner and @Luka Milicevic for the replies, and sorry for the delayed acknowledgement on my end. I've decided in line with John and a few others here to address the vast majority of the items in the inspection report. Luka, I appreciate your input though too, and can't really disagree with results- I'm glad to hear your choice has worked out well for you two years in. And I do agree that inspectors are uber-conservative for liability reasons.

For those that might be curious, I've pasted below the scope of work that I'm anticipating to have done. I'm surprised that so many folks on here said the work could likely be done for about $5k. Is that perhaps for work by unlicensed / uninsured subcontractors? I've opted to go the general contractor route for most of the work (except for mold and tree removal) as opposed to managing a bunch of subs myself, and the bids I received have been over $10k (not including the mold remediation and tree removal, which appear to be about $4k and $2k respectively). I budgeted about $18k for the rehab. Of course, it would be great for it to come under that number, but I'm not counting on it. I'm curious to hear if others say that cost estimate is crazy after reviewing the scope of work below.

Note the numbers that follow in parentheses reflect the corresponding problem in the re-inspection report expected to be corrected. The re-inspection report was done after the seller attempted to have some items corrected (but did a miserable job). It can be found at https://dl.dropboxusercontent.com/u/105466347/713bonniebrae.pdf

PLUMBING: Replace PVC piping connections to water heater with copper (37), repair or replace damaged ice maker (45); replace damaged dishwasher hose (48), replace leaking pipes under sink (49); replace sub floor under tub and toilet with accompanying tiling to area floor and address relevant leak(54); replace flexible drainline(64); Install missing bathtub drain stopper (62); add backflow prevention to outside spigot (91)

STRUCTURE: Replace hurricane straps with approved nails (71); reclean ductwork (74); extend gas fired flue (86); Remove standing water;  dig vent wells and/or repair basement walling etc to stop water entering crawl space (87); insulate water pipes in crawl space (92)

ROOF & GUTTERS: Replace damaged duct end-cap and cover (10); Add downspout extensions to divert rainwater away from house: Add matching gutter extensions to extend from roof into gutters; Clear moss from roof (20); Add splash blocks and diverter pipes away from structure (14); Replace rain boots and do remedial roof work(13/15); align gutters properly and renail to fascia for correct flow(16); extend downspouts into gutters (18), clean out downspouts and gutters (19); repair leak point (70)

ELEC & HVAC: Install 1 carbon-monoxide detector in hallway near base of stairs  (27); Install balance of internal coverplates as well as exterior outlet cover (28,29); Make good loose light fixtures (30) and attach faulty dishwasher bracket (46), replace HVAC filter (77)

INTERIOR: Remove old or molded caulk and silicone to tile in bathrooms (58,59,61,63)and and kitchen back-splash (50). Remove broken or thinning grout to grout lines. Re-apply grout to areas requiring (shower corners and floors, mostly) and then using colored silicone to match, finish off all areas requiring soft joints.

TRIM: Adjust all interior and exterior doors to latch (80, 84); repair all windows for freedom of movement (81); Replace broken window to kitchen (81)

FRAMING: Repair over-notched flooring joists (89)

EXTERIOR: Remove soil from wood contact (4,11)

PAINT: Touch up baseboards after all polly work, walls and doors.

ATTIC / PESTS:  trap existing rodent infestation using cages, clean out all contaminants, seal off entry points (68)

GROUNDS: Replace rotted wood (2), Add drip edge and replace piece of damaged wood behind HVAC unit (6);  replace rotted corner boards (7); replace damaged siding and paint, as well as siding screws and loose soffit (9)

Luka Milicevic · Answer

I remember when I purchased my first home (primary residence) my real estate agent told me not to freak out when I get the inspection report.

The inspector did a good job of going through everything and making notes on even the smallest details. I honestly think they have to be very conservative when they give their recommendations-possibly for liability reasons. When I read through the report, it seemed I needed to tear down the house and rebuild it because there were so many recommendations from the inspector. Mind you, it looked perfectly fine to me.

He recommended I replace the AC unit, furnace, all the windows, the water heater, and a couple of other things that weren't up to code. I ended up not making any changes to the house other than cosmetic upgrades.

Fast forward 2 years and I have not had a single issue with anything he recommended replacing.

If something just doesn't work-it doesn't work and probably needs to be replaced or repaired. I guess best thing is to use your judgment when reading the report and remember they are very conservative with their inspections.

John Weidner · Answer

@Jerry Bruckenheimer

Most inspectors don't walk roofs these days

I agree they should though

John Weidner · Answer

@Rob Condy

Good report

Some minor but I disagree that this looks like a solid house

This place will nickel and dime you if you get a picky tenant in.

Granted your probably looking at about $5K to tackle it all but could be closer to $8K depending on the mold remediation.  You know about the mold and unless you tear it out it will be a major liability if someone gets sick and you knew about it in an inspection

Being your out of state as I read in your other post you should plan on fixing most Interior issues to avoid calls every other day once a tenant gets in there.

Rob C. · Answer

Thanks for the tips @Jerry Bruckenheimer . I see how that approach would work for a DIY flipper that tackles repairs on their own. Do you ask your contractors to take a similar approach, and just see what scope of the work they decide on?

thanks, Rob

Rob C. · Answer

Thanks for the examples of what you would consider doing versus not, @Jim Adrian. That's very helpful. And the approach you recommended, is in fact exactly how I've been operating thus far- "If this is my house what would I do?" Thanks for reaffirming that.

Rob C. · Answer

Thanks @Frank R. for your input. I just noticed I missed your post earlier. You really think it's a couple thousand dollars worth of repairs? If so, then I need to hurry and find a new contractor. Mine has quoted a figure north of 10k

How to choose what to repair from inspection report

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