Written by Chris Majerle, PCAM on September 24, 2019

Rental Management Edition

A home inspection can easily cost $400. And then, what? You get a list of corrections you would like the seller to make or you negotiate with the seller for concessions. In the end, if you and the seller cannot agree, you have no obligation to proceed with the sale… and you’re out $400.

If you are going to be a serious real estate investor, you should learn a little about the product. Most of the defects involving major sums of money can be seen fairly easily on a quick visual inspection, provided you know where to look. Let’s just think about it for a minute.

The most costly defects involve water getting to places it doesn’t belong. Roof leaks, windows leaks, plumbing leaks, and basement leaks are the culprits. But water has the lovely quality of leaving a stain. So, look at all ceilings for evidence that water has leaked from the roof or plumbing above. Look at the bottom of the walls in the basement. Look around and below all windows. These are the most common areas of visible water damage. You may also try to move the toilets—if they move, there is a good chance they are leaking below the floor. Often, the floor gets soft around leaking toilets. Check under sinks and vanities. Check shower and tub surrounds for soft, flexible walls.

Next to water, mold is a hot issue. Of course, mold requires a moisture source, so if you found water, look for mold. Mold can be black, white, or green (not to be confused with mildew—mold is generally at least a bit fuzzy). Mold likes to grow in dark, damp spaces, so many of the same places you just looked are where you will find evidence of mold.

Finally, make a visual inspection of major mechanical and structural components. Anyone can see a missing roof shingle or shingles that are curled or bubbled-up. You can see missing siding, rotted windows, walls that have shifted off the foundation, rotted floor joists (when exposed in the basement), broken concrete driveways. These are costly items to repair or replace. Is the furnace old and rusted? Does the electric panel still use fuses? Is the wiring aluminum? (Note: Aluminum wiring has the word “aluminum” printed on the wire insulation if you can find exposed wire.) Are the pipes made of copper, steel, or plastic? (If they are gray plastic, it may be polybutylene–watch out! White plastic is fine. Copper is usually fine.)

You may not be a home inspector, but before you take your time to write one of those 38-page offers and before you pay for a home inspection, why not look for some of the obvious conditions that would cause you to walk away from the deal? Walk now—it’s $400 cheaper! It also may be easier to negotiate a lower price upfront by raising the concerns at the time of the offer. People get stuck on numbers. Psychologically, sellers are more accepting of a justifiably low offer from the start than a return to negotiations after they have mentally spent the money or told their friends what they got. Oh, and after your offer is accepted, pay for the inspection. Remember, you’re not an expert. And then hire a good rental manager to protect your investment.