You have just been given a lead on a new property. You are told that if you want to make an offer, time is of the essence. You hop in your car and run to the property as quickly as possible. While inspecting it, you take a few notes and figure you have seen enough. To your delight, your offer is accepted and you move to close in 10 days. Only after the closing do you notice cracks in the basement or problems with the plumbing. If you just took your time and inspected the property correctly, you would have never gotten involved in a property you immediately regret.
This scenario happens more than it should, especially with new investors. They are in such a rush to close a deal that they speed through the most important part of the process. Instead of taking their time and properly evaluating a potential investment they race against the competition and make an offer. Getting a deal just for deal sake is not the point. You want to make offers only on properties that you see value in. Value often lies with the repairs and upgrades that are needed. Overlooking a major item can quickly turn a potentially profitable property into a disaster. In real estate wholesale deals, for example, time is of the essence as these deals need to be inspected quickly with a decision even quicker. To do this best you need a checklist and guideline in what to look for. At the very least, you need to know the condition of these items and it may cost to fix.
Exterior Items: It is easy to race into the interior and start there. There are thousands of hidden dollars in the exterior of a property. This is where your curb appeal lies. If the outside of the property has warts, very few buyers will enter with an open mind. Start with the most expensive exterior upgrade: the roof. Roofs are not built to last forever. Because of the steep price tag, many homeowners put off until they have to. You should be able to get an idea of the age and condition from the outside. If not ,you can look at an upstairs window or even a latter if possible. A new roof can cost you thousands, but is critical if you are flipping the property. You also need to look at the foundation. Walk the entire exterior and see if there are any cracks or shifts. You may need to look in a basement or crawl area to see if this may be a sign of a bigger problem. You also need to access the condition of the paint or siding. This could be as easy as a power wash or as costly as a new coat of paint. Either way, you cannot ignore the condition. It must be added to your budget.
Interior Items: The inside of a property can be overwhelming if you don’t have a plan. Start by taking a look at the windows. Savvy buyers appreciate new windows. Not only are they safer, but they can save the homeowner money. Get a count of all the windows and where they are located. From there, take a look at the guts of the house. The furnace, water heater, oil tank and electricals are big ticket items. If the electrical items are old, they will need to be replaced or updated. These can be costly fixes if the items are outdated or obsolete. Look at the fuses, electric panel and piping to give you an idea of how long they will last. You may not need to replace these items now, but eventually they have to be updated.
Upgrades: Kitchens and bathrooms sell houses. These may be in fine working order, but that is not enough. When you inspect a new deal you have to account for interior upgrades. You may not need new stainless steel appliances, but the cabinets and other items should stand out. You don’t need to make a decision on your inspection, but you should have an idea of what work needs to be done in the kitchen. The same is the case for the bathroom. There may be ways to save money, but not at the expense of the bathroom. Look at the flooring, vanity and shower and note the condition and the age. Little things like the fixtures, flooring and appliances can break your rehab budget if you do not expect them.
You may only have one opportunity to inspect a new property. Take as many notes as possible. If you need to take pictures, do that as well. Don’t just scribble some notes down on the back of a napkin in your truck. Develop a checklist and a system for every new property you go to. Following this checklist won’t take you more than a few extra minutes, but could save you thousands. If you don’t know all the costs, run them by an experienced contractor. The better notes and pictures you take, the more accurately they can write up an estimate.
The best part about the real estate business is that you can do it any way you like. The system you develop should be your own, but you need to have an inspection system in place. Making quick decisions is an important part of the business. The more organized you are in your inspection, the better offers you will make.