Author Topic: What should I look for when inspecting buy and hold investment houses?  (Read 2818 times)

not_a_trex

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A coworker was looking a buying a house to live in and I decided to tag along to try and learn what to look for when buying an investment property. We looked at a few houses and he found one that he liked. After each one though, I was just like "yeah, that's a good house." or "I don't like that house." I couldn't really grasp what it was I was looking for. It made me realize that I need to come up with some rules when searching through potential investments.

If I'm able to find a neighbourhood to invest in and I've narrowed it down to a few properties that look good on paper (not to say that I have...), what should I be looking for when actually inspecting the house?

Hallihunter

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Re: What should I look for when inspecting buy and hold investment houses?
« Reply #1 on: August 22, 2014, 11:30:28 PM »
Where would you live?
Would you send your kids to that district?
How close to schools? Shopping? Public trans? Highways?
What demographic will you be renting to, and do these matter, eg. Public trans. In my city/area there is little or none.
Established neighborhoods with a small rental inventory is ideal.

When it comes to the house insp., hire a structual engineer if the house is older than ten years. Maybe cost ya $200 or so, but worth it!! Will save you in the long run. They call it a foundation for a reason. Before he comes out ask what he needs, prob two holes exposing the footings to bearing depth and a latter to look at the trusses. Even better, ask if he has a "r-meter" to scan for steel in the slab/ftgs.

The home insp should pick up on little and big things but do your research about the inspector, usually the agent just calls their regular guy. Make sure he's fluent in recent code, not that you have to upgrade to newest code, but it good to know why the code changes.

waltworks

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Re: What should I look for when inspecting buy and hold investment houses?
« Reply #2 on: August 22, 2014, 11:31:57 PM »
Are you looking for rentals? Flips? Primary residence?

Regardless, hire a professional inspector if and when you find a place you're interested in. They will do at least a decent job of finding problems with structural/electrical/plumbing/appliances.

You don't really need to like a house as a place to live to buy it as an investment property. So generally the criteria will be more objective - ie does it rent for a good amount relative to purchase price, how much repair work is needed/will be needed in the future, is the location a good one to see rents rise/neighborhood stable or improving, etc.

-W

not_a_trex

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Re: What should I look for when inspecting buy and hold investment houses?
« Reply #3 on: August 23, 2014, 01:25:27 AM »
Sorry if I wasn't clear initially. My coworker was looking for a house to live in. I was just tagging along to try and understand what to look for when searching for investment properties. I am looking for buy and hold SFRs.

So if I understand correctly, it doesn't really matter what it looks like on the inside? It's more about where it's located? Is the only reason to look on the inside of the house to have the inspector go in and find any damages that need to be fixed?

waltworks

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Re: What should I look for when inspecting buy and hold investment houses?
« Reply #4 on: August 23, 2014, 08:49:30 AM »
No, it's just about what it'll cost you (repairs, PITA, etc) and what you can get in rent. Location will affect the latter and sometimes the former as well.

-W

not_a_trex

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Re: What should I look for when inspecting buy and hold investment houses?
« Reply #5 on: August 23, 2014, 10:35:41 AM »
Heh. I guess I never thought of it this way. Thanks.

zinethstache

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Re: What should I look for when inspecting buy and hold investment houses?
« Reply #6 on: August 24, 2014, 04:14:06 PM »
For properties in our target areas, and If the numbers work, we will drive by and it gets a thumbs up or down. Most properties we are interested in require a PSA to get inside. The market is hot here, and offers are in on a good property the first day or two of MLS listing (we dont have any connections for non-MLS properties). Our first time inside is often at inspection, which means we are pretty committed at that point. While the inspector does his thing, we go through looking with our tenant glasses on and make notes of any easy fixes/updates to make the place more rent-able and appealing. Bad layouts we make note of such as bad bathroom location, very outdated finishes, tiny kitchen etc. So far we've gotten lucky and haven't had to back out of a deal because the layout was horrible. We had a PSA on a short sale with a jack and jill bath, it was the only bath so one had to traverse a bedroom to get to it. The place was vandalized so our decision was made for us. Our first duplex was "rejected" by the winner because the place was not appealing to him for some reason and we got the contract on round two. We did not see a thing wrong with the place when we did the walk through. The tenants are still there, happy that we are good landlords that take care of the place.

We are DIYers and prefer a property that needs work. Work that we have the skill for and work that will increase the value of the place and preferably raise the rents:) updated bathrooms, better storage, insulation (yes one property needed insulating, go figure). We will not be selling these properties any time soon so if there is a tenant we just make note of an update/fix to do when the tenant leaves. Foreclosures and short sales are preferred, but we only have one foreclosure. The other properties were standard transactions, albeit very fast ones as they were  priced under market. We were there at the right time with fast turnaround financing that made our offer appealing.

arebelspy

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Re: What should I look for when inspecting buy and hold investment houses?
« Reply #7 on: August 31, 2014, 09:18:00 PM »
If I'm able to find a neighbourhood to invest in and I've narrowed it down to a few properties that look good on paper (not to say that I have...), what should I be looking for when actually inspecting the house?

You should check out some of the real estate books here:
http://forum.mrmoneymustache.com/real-estate-and-landlording/real-estate-book-recommendations/

You will want to define your criteria, definitely, but asking what that should be depends on both your investing goals and profile as well as your local market.  Fourplexes, for example, are great in some markets.  I wouldn't touch them with a 10-foot pole in my market.

Start to read about rental real estate, and research what your local market has, and start to define your criteria for a good rental for you.
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