Is It a Money Pit or a Gold Mine: Doing a Property Walk Through (Part 1)
January 22, 2019
Whether you’re buying a piece of property to rent, flip, or live in, doing a thorough, systematic walk through is essential to evaluate the potential of the property. Even if you are having a house inspector do their thing, it is important that you have a good look yourself. Depending on your intended use for the property, you will be looking at it with different eyes than your inspector. For example, your inspector won’t care if the cabinets are an ugly, but serviceable green but, depending on your intentions, you may want to replace them or decide to live with it.
Rules of Thumb
Especially if you are an investor who looks at many properties. The more systematic you can be, the less chance there is of you missing an important detail. It also allows you to compare different properties more easily when you collect the same information about each one. Always start at the same place and follow the same route (as much as possible) through your inspection. You will find yourself noticing patterns and picking up on things you would miss with a more unstructured tour.
Use a Checklist.
There are a LOT of things to look for when you’re trying to figure out how much it will cost to renovate or how much work you have to do to rent out a property. Having a checklist is critical to ensure nothing gets missed and, equally important, that things that don’t need to be done don’t get done. Checklists won’t solve every problem (a bad checklist is still bad) but they will, at the least, help organize your thoughts. Here is a checklist you can use for your next project. Walk-Through Checklist.
Take Lots of Notes and Pictures.
The more detailed you can be when you gather your information, the more accurately you can estimate your costs. Also, your memory isn’t perfect. Did that kitchen sink have an overhead light? What brand was that water heater again? There will be lots of things you notice as you walk through. Write them down! Take pictures!
Keep Your End Use in Mind.
You will make different decisions about amenities and renovations depending on what you plan to do with your property. If you are planning on renting it out, stick with lower cost, functional renos; put cost before aesthetics. If you’re planning to flip the house, then you need to think about making things look a lot prettier; plan to spend a little more and take a bit more time for the job. If you are planning on living in the house, then you want both functionality and nice amenities.
First inspect the roof for curb appeal. If the shingles are curling or if it looks so bad it might put someone off buying the house, it’s probably in need of replacement. Anyone making an offer on the property is likely to discount the offer based on their estimate of the roof repair anyway so, since you can get it done more inexpensively, you save money by having it done before putting the house up for sale. If you are planning on renting the property, then the condition of the roof is more important than how it looks. In that case, perhaps the roof repair can be left till a later date. You should be looking under the eaves for signs of rot or water damage on the soffit and for evidence of ice damning which might indicate a problem with the attic insulation. If you are ambitious, climb up on the roof and walk around feeling for soft spots (potential sheathing problems) and check the flashing around roof vents, chimneys and other roof penetrations. You can check the underside of the roof when you inspect the attic. Finally, keep an eye out for water damage inside the house.
Ignore the gutters at your peril! In many cases, problems with leaky foundations and damp basements can be traced to damaged or poorly installed gutters. Their job is to direct water from the roof away from the house. If they are damaged, water will pool beside the house and cause no end of trouble. So, if they need looking after, take note AND be sure to check the basement to see if they have already been a source of problems.
This is an area that can really deliver a bang for your buck. A new coat of paint can make and old mongrel look like a show dog.
Depending on its condition, you could even paint siding or stucco to freshen it up. Of course, you need to check for cracked stucco and missing or disfigured pieces of siding (often from being to close to a BBQ). Look carefully at the parging (special, water resistant material applied around the foundation at ground level), it is often cracked and missing on older homes.
Windows and Doors.
Check the age and condition of the windows and doors. If the windows are single-pane, consider replacing them with at least double-pane models. Unless you are in a particularly upscale neighbourhood, plain old vinyl windows will be more than adequate. If it’s a rental unit, go for the least expensive option that works. Check that all the windows open and close easily. Look for rot and water damage on older wooden windows; sometimes they can be salvaged but if they are that old you will have to replace them soon anyway so you might as well budget to do it now. Doors seldom need to be replaced except for appearances sake. Just be sure they open and close and sit square in their frames. Crooked doors can sometimes point to excessive house settling.
Fences and Decks.
Most fences, unless they are rotten and falling down can be repaired and painted. If you do have to replace a fence, a wooden one is probably the cheapest option. Remember, fences are often shared with neighbours so you may be able to work out a cost sharing agreement to replace an old, unsightly fence. Decks and railings need to be carefully inspected to be sure they are structurally sound. Look carefully at the posts for water damage or rot where they contact the ground. If the supporting structure is bad, it is usually best to tear the deck down and build a new one. Railings can simply be replaced. Once it is sound, a fresh coat of paint should be all you need.
This is another area where your effort should reflect the purpose of your investment. For a rental unit, a reasonably green lawn and a few neatly trimmed hedges is good enough. For a flip project, a little more effort might be required to bring the property up to standards comparable with the neighbourhood. In either case, also note the condition of any trees on the property. Dead branches will need to be removed. Big, old trees look great but, if they are starting to die, they can be very expensive to cut down. If you decide to do the job yourself, beware, cutting the tree down is only half the job. Getting all that wood disposed of can also be costly and time consuming.
Walkways and Driveways.
Check for bulging, cracking and general unevenness. A concrete slab walkway can be easily and inexpensively replaced or repaired. A driveway with significant humps, slumps and cracks will need to be replaced which is not cheap. Minor cracking can usually be taken care of with a layer of asphalt or a driveway repair compound. Pay attention to this because walkways and driveways have a big impact on the curb appeal (and therefore the value) of your investment.
The exterior of your investment is what potential buyers and renters see first. Their first impression will tell them how well cared for the property is. A good first impression will help people relax and see the good things about the house. A bad first impression and they will be looking for excuses not to buy. In general, clean, simple and neat will serve you better than elaborate and fancy. You want people to see the property as low maintenance and easy to care for. Now is not the time to “surprise” people, give them what they expect.