Among many of the services we use in the real estate industry, home inspection is one that we don’t hear much about bit is incredibly important (and tends to save our ass).
We’ve worked with clients on purchasing properties for themselves and we’ve also invested in some of our own properties as rentals, and we always recommend a home inspection.
There are a few cases where they really came in handy and saved us from a huge financial headache had we not done it.
Our own use-case
We were gearing up to purchase a property that stood to create a steady cash flow of $500 each month as a rental property.
Most houses that we go for are generally older and require some work, so it’s standard process to get an inspection done in case we miss things.
Inspections are important because there are certain tools, such as thermal imaging, that allows the inspectors to view things inside walls and spot potential issues.
In this particular house, we found that there were some serious electrical errors that posed a hazard, potentially leading to electrical fires later on down the line.
Because we used a full home inspection on this property, we were able to identify it and actually negotiate the price down to compensate for the amount of repairs we’d have to do.
In this case, that was about $8,000 because all of the wiring needed to be redone in order to replace very old wire and make sure everything was grounded appropriately.
Now imagine that we’d purchased the house and assumed we’d receive our $500 cash flow each month.
It’s unlikely that we’d just out of the blue replace the wiring, so that means we’d have found out because an event would have happened, such as an electrical fire.
That leads to damage on the walls, liability with the tenants, possibly getting sued or fined.
That $500 cash flow would have easily turned into a negative number for a long time had we not found it before the purchase to, not only renegotiate our deal, but also catch and fix the problem before it turned into a disaster.
Home inspections should damn-near be mandatory
In some cases, they are, as some banks will require an inspection to be done on an existing home.
Even with new construction, there are phase inspections that are done to ensure that things are done properly.
You also want inspections to be done by a third-party and not the builder himself, as they can easily cut corners or lie about things, claiming that you signed off on it.
But, really, the cost of an inspection is, on average, about $400-$450.
That’s really not much for basically an insurance on your purchase of upwards of several hundred thousands of dollars.
And it’s only a one-time thing.
If you’re sure that other parts of the home are in great shape and simply need one component checked out, you can always just do a partial inspection, which just breaks down the inspection process in only the parts of the house that you want.
This saves the inspector time and saves you money, while making the deal much more quickly.
The reality is, when you’re making a big financial decision and investment like with a property, you want to make sure you’re being sold what you believe you are buying.
There’s actually a lot more to home inspection that can help evaluate a house, and even some things that you can do yourself to identify when home inspections are necessary.
So, we’re going to continue to bring you some information about that in the coming weeks.
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