Why You Can't Afford to Skip Your Home Inspection

As investors know, buying a home, condominium, or commercial property involves a certain amount of risk. Obtaining a home inspection, whether you are considering “flipping” the property or using it for rental income, is an indispensable tool that can save you both time and money while helping to maximize the return on your initial investment.

Knowing what problems a structure has can often make the difference between deciding to purchase it or not. Additionally, understanding the issues that exist, and the cost to repair them, can help you properly value your investment at the time of sale or rental. Below are some of the areas that home inspections cover and the questions that you should be asking of your inspector.

Why Bother With Home Inspections In The First Place

There are a number of reasons why retaining the services of a qualified home inspector should be part of every property investor’s checklist. This is not only true for the domestic market, but even more so if you are considering investment property in Latin America, or elsewhere.

Time is of the essence – When you purchase a house for personal use, issues that require repairs or upgrades are often overlooked (unless they involve critical structural concerns) as work can always be done at a later date. For the investor, however, time is a thief in that any work that needs to be done delays putting the property on the sale or rental market. That translates into less potential return or profit.

Knowledge is power and profit – Understanding the issues that exist in a potential investment, BEFORE actually committing funds to that project, can help you evaluate whether your outlay will be justified by your return. By having the property inspected as a contingency to purchase, you can avoid falling into the proverbial “money pit” that could result in higher costs before it is ready for market.

Conversely, an inspection may also reveal that what first appears to be a risky investment, may actually be a diamond in the rough; requiring comparatively little outlay with a high return potential. Either way, the information from a home inspection translates into bargaining power and higher profits.

What You Should Expect From A Home Inspection

There are a number of primary areas that a qualified home inspector should be looking at. Remember, you are paying for this examination and are entitled to a comprehensive view.

Exterior: The walls, foundation, grading, paved areas, the roof, and any external structures on the property should all be part of the inspection. Beyond the physical appearance of your potential investment site, an inspector should also be able to determine whether there is any insect infestation (termites, wood ants, etc.), flood issues, zoning concerns, or other problems that would require correction before renting or resale could take place.

Interior: The interior of the property is probably the most detailed part of the home inspection. It can also be the most difficult to complete as access to many of the systems may be restricted by the layout of the house.

-Electrical systems, including circuit breakers/fuse boxes, wiring, and outlets should all be examined to make certain that a)they are up to code and; b)that they are adequate for the anticipated use of the property. Specific attention should be paid to those locations where higher voltage is needed (kitchens, washer/dryers/air conditioning).

-Plumbing is an extremely important concern. All fixtures should be checked for leaks or corrosion (indication of a leaking issue at some point). Proper installation of toilets, adequate ventilation, and signs of mold and mildew should be included here.

-HVAC (heating, ventilation, and air conditioning) need to be checked. Repairs on parts of this system can be extremely costly and could impact your decision whether or not to purchase.

-Kitchen and bathrooms: As the two most heavily utilized parts of a home, making certain that the kitchen area and bathrooms are in good order is an important part of making the property sale or rental ready. It is conventional wisdom that the condition of the kitchen and bathrooms can make or break a sale. Having these rooms examined can help you forecast what upgrades or repairs will need to be factored into your marketing price.

-Other issues, such as fire safety, general condition of floors and stairs, insect infestation, etc. should all be part of the interior inspection. Beyond the cosmetic concerns, addressing problems at the beginning can help maximize profits at the end.

Taking Action After The Inspection

After the inspection is complete, you have a number of decisions to make. Depending on the results, you may not decide to go ahead with the purchase. Alternatively, you may need to balance the costs to purchase and make the needed repairs/upgrades on the potential for a higher return at rental/resale.

One challenge is that most property inspectors are generalists. While they may have a specific area of expertise (plumbing, electrical, HVAC, etc.), an inspector may indicate that you need a follow-up inspection with an expert in a particular field to get a better idea of what is needed to correct the situation. Whether or not you want to undertake this additional cost and time expenditure is a choice that will have to be made. Negotiating with the seller is also an option here.

Home Inspections Can Take Worry Out Of Investing

Investing in real estate, especially as the market is rebounding world-wide following the 2008 collapse, doesn’t have to be a scary proposition. By using a qualified home inspector, it is possible to find real opportunities for solid returns on your initial outlay.

Many investors are taking this strategy and looking beyond the U.S. boundaries to locations in other areas, such as Central America. Having your potential investment inspected before purchase in these new areas is even more important than in the fifty states.

Regardless of where you are looking to make an investment, home inspection can give you an important advantage. Truly, home inspection is an investor’s best friend.