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Zhi Finance » Is the test really necessary?

Is the test really necessary?

One question that seems to be common among those interested in real estate investing, and especially among those interested in speculating, is whether real estate inspections are really necessary. The long and short of the answer to this question is absolutely, and I will do my best to explain why this is the case.

First of all, a real estate inspection is the act of having a qualified (and in many states, licensed) professional inspect the property you are considering and inform you of obvious and potential damages or problems with the property. This is not something you want your Uncle Bob to do unless, of course, your Uncle Bob has the training and experience to know what to look for in an inspection and what these things might mean.

Many people who plan to flip properties (especially first time flippers) go into this situation with the attitude that they know there is something wrong with the property and that is why they are buying it. The problem is that the untrained eye may miss some issues that should be addressed before moving on to others.

For example, if there are obvious signs of a plumbing problem that could cause a leak behind a wall, you wouldn’t want to paint that wall or replace the flooring until the possible leak has been inspected and confirmed or denied and repaired if necessary. Otherwise, you’ll likely need to undo work already done (wasting time and money) that was already done when you discovered the leak, and a qualified inspector will tell you that before you start work.

Inspections are good before bidding on a house because they actually give the investor a bargaining chip. For the true (inner) investor, this is a fact that simply cannot be ignored, as it directly affects the bottom line price. If the roof needs to be replaced, you have a reason to offer a lower price. If the electrical system needs to be updated, this is also something that should be adjusted or corrected in the final offer. These things are also easy to spot by a qualified and competent property inspector. Anything that saves time and money when investing in a property is great, and an inspection can do both.

Another benefit of a good property inspection is that it often reveals how much money is needed to get the house in good working (or showable) condition. Knowledge is very important in this industry, and it can mean the difference between taking on a project (if the repair budget won’t exceed the final value of the property) or walking away (if the costs are too great to realize a decent profit). As an investor, you shouldn’t take on a property that is almost guaranteed to fail; it’s simply not a smart financial move. In the investment business, the bottom line is the only thing you should consider, regardless of how attractive the property is to you on a personal level.

More importantly than anything mentioned above, however, a proper home inspection can tell you about potentially dangerous conditions in the home that an untrained eye may not notice. Some of these conditions include toxic mold, which can be a financial disaster and a danger to your health; foundation problems, and structural damage that threatens the integrity of the property. Inspectors should also be aware of the structural integrity of the home, which could affect your home if they are weakened or fail altogether. While these things may seem simple, it is often these simple things that lead to the biggest disasters. Whether you realize it or not, a good home inspector is one of the best tools you can have when it comes to flipping real estate as an investment risk.