The conditions of these properties vary greatly from being abandoned and nearly crumbling to pieces to being completely renovated and rental ready. The ideal property is one that has tenants already living in them. There are two major factors why you should consider purchasing a rental property with tenants living in them.
The first one is instant cash flow. The day you buy the property you are making money. You’re generating revenue for your new real estate investment and the second reason is if there are tenants living in the property it means that it at least is functional enough or that if you need to make repairs they shouldn’t be major.
You at the very least know that the electrical system works, that the drainage system works, and that the mechanical items which are Heating & Cooling work. Now this isn’t always the case but for the most part that indicates that it’s a functional rental unit. Depending on what state and Market you’re invested in houses will have a similarity in their Construction.
Mid-West homes for example many are built with bricks and are 100 years or more old. In such cases you’ll want to check to see how old is plumbing does it still have the original galvanized steel or has it been switched to PVC and the water lines have been converted from Galvanized Steel 2 PEX tubing which is flexible and rupture proof? And the electrical system are they still using tie knots or have they upgraded to code? Are there leaks coming from the bathroom in the tub or the toilet and if so has it rotted the floor joist and surrounding wood underneath? How are the floor joists are they split or broken making the floor uneven? Are the sockets grounded?
Many old homes don’t have grounded sockets even though they may have a three-prong socket. Do the windows need replacement? check if they can be opened and closed without them falling apart due to the frame being cemented by previous coats of paint. One window may not be too expensive but when you have to replace 15 windows it really adds up. And how about the roof? What condition is it in? Do you see water stains on the ceiling? Or how about openings on the soffit where squirrels and others can come wreak havoc? Removing squirrels for example can cost hundreds of dollars until an entire family is eradicated. these are things that should be considered when purchasing a property based on its condition.
You want to have a notepad and take notes of all these observations that need to be repaired. It Will Be Your Arsenal for when you need to request a better price for the property. If you can demonstrate to the seller the reasons why you need the property to go down in price such that you can justify it due to the repairs that need to be addressed and the cost associated with it. Overall it’s best to hire a property inspector. For under $500, you can get it inspected from top to bottom including termites.
