What’s Your Strategy For Inspection Periods? Here’s Ours

Posted @ 10:40 pm - Filed under Real Estate Investing, Check This Out, Buying Income Property, Investment Lessons

You’ve successfully negotiated the purchase of an income property and have a period of time to conduct various inspections. You hire a qualified inspector to meticulously eyeball everything accessible. He then issues a comprehensive report which offers a summary up front, followed by pages of highly detailed observations, suggestions, pictures, and code quotes.

If the report says everything is A-Ok, yer good to go. I’ve seen some of those reports, they’re framed in my office as rare collectibles.

What if the report contained opinions pointing out significant problems with the roof? The plumbing? — The electrical? — The foundation? — you get the idea.

Before we continue, let me surprise you a bit. There are times when we don’t hire an inspection company. Yes, they’re rare, but sometimes an inspection in general isn’t as important as having a specialist or three on the property.

If when we first purchase units, whether a condo, townhome, or multi-family, and inspect the interior/exterior ourselves, there are things we look for. You know, obvious stuff. Roof, electrical, plumbing, foundation, heating and/or A/C, etc. If we see obvious problems we then call in a specialist to look at it. A journeyman electrician or sometimes an electrical engineer can give you a far better picture of what you may be facing than a generalist whose primary agenda is protecting his own caboose. That’s not in any way to be construed as a knock on inspection firms. We rely big time on our the inspection firms we use, and trust them implicitly. Their liability is ah, kinda large, so they tend to error on the ‘trouble’ side.

Bringing in specialists is cheap, as most will take a look for $0-50, rarely more. Once they learn you’re a serious investor, and will be buying/exchanging properties on a semi-regular basis, you’ll almost always get the straight poop. That’s been our experience.

Here’s an example.

A few years ago a client purchased a fourplex in San Diego. Upon inspection we all immediately saw the signs of an ongoing roof problem. We quickly called in both my roofer and the client’s. They submitted their findings along with prices. These were passed along to the sellers who then had their roofer add his two cents. The result was a repaired roof, certified in writing for five years.

When inspecting an older building, why waste hundreds of dollars on a general inspection when you know things aren’t gonna be in the condition you prefer? We go in assuming everything has been totally ignored for years. It’s at that point we then schedule inspections of all the major ‘factors’ of the property. This will always include foundation, plumbing, electrical, roofing, heating, and air conditioning. Sometimes we bring in a civil engineer who will look at retaining walls or the potential need for one. (Drainage problems?) Walls/fences can sometimes prove to be unexpected pains in the butt. If they don’t look picture perfect, get them looked at, and not by good old Uncle Fred. Get a pro every time. Don’t mess around with this, ‘cuz it’s way too important.

And pretty please with sugar and top, don’t pinch pennies. Your best case scenario is to be out a few hundred bucks for several specialists who all ended up telling you everything was A-OK. This is an i-n-v-e-s-t-m-e-n-t, remember? Yer dropping thousands of bucks, maybe a few hundred grand on property with the expressed agenda of having that capital end up larger not smaller when yer done. Keep that mind at all times.

Look, this ain’t rocket science — the proof is I figured it out. If my knee keeps hurting after my family doctor does his best with it, I can either ignore it, or see a specialist. My knee is important to me. It’s worth a few hundred bucks to find out it’s a simple sprain, right? It’s exactly the same principle — use a specialist when it comes to ensuring all the parts are working the way they should.

Don’t save nickels and dimes while setting yourself up for spending big dollars down the road. Specialize in uncovering problems to be solved by other’s money first. Hey! Now there’s an idea.

This entry was posted on Saturday, February 9th, 2008 at 10:40 pm and is filed under Real Estate Investing, Check This Out, Buying Income Property, Investment Lessons. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.