Appraisals & Inspections

I'm an investor myself and I manage properties for 20+ owners.  The opportunity to buy a property, collect rent, and see long term growth of value appreciation is an exilerating experience.

But buying a real estate investment requires due diligence.  I realize there are many investors who pay cash outright for their purchases.  As much as a lender requires an appraisal for their own benefit, I can't stress enough how getting an appraisal can only help a cash buyer as well.

An appraisal factors in property condition and considers the subject property with respect to other similar properties that sold in the area recently.  There's nothing worse than over paying for a property.  As much as there's an expense to get an appraisal, it's worth it for a better understanding of what you're buying.  While rents are increasing, there is still a ceiling.  An appraisal can be your best friend in negotiating price.  BUT!!  It can also be your best friend in determining if you need to walk away from a property.  I understand the market is hot and sometimes you need to pay more than market rate but there’s nothing worse than having market rent NOT support your mortgage and property tax payments.  Your mortgage payments will be determined based on purchase price as well.  But if you're paying 100k-150k over appraised value (and I've seen it done...to a detriment), how much more is your mortgage payment?  How much does that eat into your cash flow...the extra monthly mortgage payments because you WAY over paid?  Property taxes, insurance (read your declarations page, especially if you're only insured for FMV), and other factors relating to property value will eat away at your bottom line.  AND!  If the purchase price increase over county assessed value is large enough, there may be a good chance the local school district will challenge the published valuation.  While I do like to push the envelope for rental rates, I can't ask 1150 on a 1 bedroom in an area where 1 bedrooms are going for 800-900.

I've seen too many times buyers who buy without thinking of all the financial implications.

An inspection is a great asset and well worth every penny.  While there may be things obvious to the naked eye, inspectors are thorough to look in areas we may not think of.  They are comprehensive in the various points they cover in their inspection.  While inspectors are state licensed, they are often affiliated with 1 of 2 (sometimes both) national inspection associations...both of which provide credibility of the inspectors because of the expectations and ethics they are required to agree to.

While there's a tendency to have a friend or contractor do the "inspection" for you, I would argue against it.          Every.  Single.  Time.  

You may be saving money on the "inspection" but you pay for it with issues that were not found and or a bigger scope of work after purchase because the scope of "inspection" was not large enough.  AND, can I mention the elephant in the room:  the friend / contractor is totally motivated to line his own pockets and NOT to look out for your best interest.

I've heard too many cases where buyers had no idea the amount of maintenance needed after they've closed on the property...all because they didn’t want to jeopardize or risk the deal by making the offer contingent on an inspection.

While I am not party to the buy or sale of these investment transactions, as I have conversations with buyers (sellers too as the case sometimes warrants), I do briefly touch on these topics.

 

 

If you are a real estate agent, regarding the buy and sell of properties.  We work WITH licensed real estate agents...YOU keep the buy and sell transactions.  Every.  Single.  Transaction.  Guaranteed.


D & K Property Management Services
Karen Bostwick

(440) 590-5925

KarenMBostwick@yahoo.com

https://dkpropertymgmtsvcs.blogspot.com/

Broker License 2018002999


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