15 Minutes & $50 to Help Avoid the Nightmare House Investment

You’re a real estate investor, and you’re either doing a walk-through of a potential rental investment that’s ready to rent or a house that needs renovation and repair. Fix & flip investors are more attuned to being very observant about potential condition defects, but rental investors need to be so as well. It doesn’t matter if the home looks great, as you don’t want big problems to crop up after you have a tenant in the home.

It would be great if the problems that can bite you are as visible as the electrical outlet image above. However, this article is about hidden defects that can be quite costly if they’re not discovered before closing on a purchase. Even if you’re doing a fix & flip or fix to rental, not finding some defects will keep them out of your repair budget and cut profits or increase the costs to get a tenant into the unit.

Yes, you can have a contractor with whom you have a relationship come in and check out the house for you. You can also have an inspection contingency in the purchase agreement so you can have the home professionally inspected. However, what can you do in a preliminary walk-through to avoid some of the most common defects that are not necessarily visible?

Electrical Defects

Especially in older homes, sometimes the old two prong ungrounded receptacles were replaced with three prong grounded ones, but without a proper ground. Basically, it’s a visual fix that does nothing. Drop into Home Depot and spend around $5.00 for a small tester you can carry in your pocket.

Take the tester with you and plug it into receptacles in various rooms. With indicator lights, it will let you know if there are grounding problems. If you find issues, then it may be worth more detailed inspection by an electrician if the house still looks like a good buy, but at least you know to look.

Moisture Problems

A one-time expense of $30 to $50 at a home improvement store will buy you a digital materials moisture meter. It’s easy to use, selecting the type of material, wood, sheetrock, etc., and pressing the electrodes into the material to get a moisture reading.

The guide with the tester will let you know if there is excessive moisture in the material, a sign of possible major problems down the road. You don’t know at this point where the moisture is coming from, so checking for leaks in plumbing is a necessity. Failure to find and correct the underlying problem will definitely cause expensive corrective action down the road.

Some investors are picking up bargain foreclosures in storm-damaged areas, and renovating for profit or rental conversion. Moisture detection is extremely important in these situations, especially when there has been storm water intrusion.

Mold

Both of the previous defects have almost zero cost tests once you buy the inexpensive testers. Mold is a different matter, as other than visually seeing it, only lab tests can definitely state its existence and the type of mold.

Lowe’s sells a mold test kit for around $10. You take a test receptacle and attach it to a portable vacuum and gather dust around walls and under tubs and sinks around the home. Then you mail it to the lab. For a $40 fee, in around 7 days you get a report of whether mold exists and what type of mold is in the home. This is another very important test because mold remediation is extremely expensive, in some cases homes even being abandoned due to mold infestation. If you have the time, especially in storm-damaged areas, this is a test that can save you a fortune, especially if you avoid a tenant lawsuit over health problems.

Sure, you can hire professionals for all of this, but especially for the first two, you can take a couple of minutes during your walkthrough to see if you need to do more inspection.

Source: huffingtonpost.com