If you’re buying real estate, you know the first rule is location, location, location. The second rule is, “Inspect before you invest.” Even a first-time investor can look for these tell-tale signs that can turn a profitable fixer-upper into an expensive money pit:
1. Many Previous Owners
Property records tell you the history of a home, and much of this information is now available online. A history of many owners over a relatively short time may mean that the home has problems that previous owners were unable or unwilling to fix.
While you’re doing your research before buying real estate, make sure that any structural additions are permitted and built up to code. Ask the seller for the 3R report (the Report of Residential Building Record) which should detail any major structural changes.
2. Cracks in the Curb Appeal
What do you see when you walk up to the property? Are the driveways, walkways, and other concrete surfaces showing signs of damage? Are there cracks in the exterior brickwork? These could be signs of a variety of problems such as
- Poor workmanship
- Poor drainage
- Foundation problems caused as the house settled
While you’re outside, take a look at the gutters that run along the roofline. Broken, sagging, or rusting gutters are a red flag that should alert you to possible water damage outside and inside the structure.
3. Smells, Good and Bad
When you walk into the house, do you smell a musty odor? Look carefully for water damage such as
- Stains in the walls or ceilings
- Damage to cupboards beneath sinks or to floors around tubs and toilets
- Warping around windows or below window sills
- Damage around drains
Frugal sellers may cover water stains and even mold with a coat of fresh paint, rather than replacing the damaged drywall. Typically, the new paint keeps moisture and mold in the wall where it can become a health and structural hazard.
Sellers and real estate agents may also use air fresheners or scented candles to mask other odors. Fixing leaky sewage pipes, remediating mold, and replacing carpets damaged by smoke or pet urine can take a big chunk out of your renovation budget. Take note of what your nose is telling you!
4. Warped Flooring
Many eager renovators buying real estate think the aged hardwood floor in an older home will just take refinishing to look great again. Test the floor before you fall in love with it. Does it feel uneven or unstable under your feet? Experienced professionals often test the floor with a level or even by placing a marble on it to see how it rolls.
If you find the floors are not level, or if the floor feels excessively springy, you may need to plan for much more than refinishing. Removing the floor, replacing the subfloor, and shoring up support columns or joists can add substantial time and cost to your renovation.
Look out also for cracked, broken, or unevenly spaced floorboards as these could be signs of problems with the foundation.
5. Flickering Lights
If you’re buying real estate in an older neighborhood, you should know that electrical systems may not be up to code or may be insufficient for a 21st-century homeowner’s needs. Lights that flicker or dim suddenly are a warning sign that you may need to budget for rewiring. Other signs of electrical trouble include:
- Heat damage or charring around light switches or plug points
- A burning odor or hum when the power is on
- An aging or damaged electrical panel
Even newer homes with additions may require careful inspection of the electrical system since many homeowners don’t think about adding electrical capacity when they add square footage to their home.
6. Insect and Rodent Damage
Termites, cockroaches, ants, rats—there are lots of pests that can cause damage and health hazards in a prospective home. Before buying real estate, look for signs of damage, such as holes, cracks, or soft spots in exposed wood. Droppings and sounds in the walls are also indications of a pest problem.
If you see signs of ongoing pest treatment, ask the seller about the cost and extent of the treatment plan.
7. Foundation Problems
The land a building sits on shifts over time, as the soil swells with water or shrinks in dry spells. These natural changes can become worse due to poor drainage around a property or tree roots that pull moisture out of the soil. Foundation movement can cause many structural problems including
- Cracks in the exterior or interior walls and ceilings
- Separation of the walls from the frame or from ceilings
- Misaligned doors or windows that stick or don’t close
- Cracks or a pronounced lean in the chimneys
If you see indications of foundation problems, be sure to consult with a structural engineer before buying real estate. Get a full understanding of the work that will need to be done before you decide to purchase.
Turn the tap on. Do you get hot water in a reasonable amount of time? Is the water clear and odorless? Does the water drain quickly? Try flushing the toilets. Do you see any wetness or damage in cupboards under sinks or warping in the floor around tubs and toilets?
If you’re considering buying real estate with beautiful mature trees in the yard, you might also need to consider their placement and make sure their roots don’t pose a hazard to the drain pipes and sewers.
Buying Real Estate as an Investment
Take notes as you walk through a prospective purchase. While your initial look will not be as thorough as an expert inspection, you will still be able to use your notes to consider your budget, how much time and effort you’re willing to invest, and how much you will need to rely on construction professionals.
If you decide to buy, your notes will become the basis of your discussion with the seller and the professional inspector—and leverage for negotiating the price of your property.