Originally published by Smart Property Investment
Knowing what to look out for at property inspections can put you ahead of the competition and ensure you purchase an investment that will appeal to both renters and future buyers.
Rain, hail or shine, prospective buyers will spend their weekends traipsing through open homes in search of their new home or investment property. Before you start your search, it’s essential to define your purchasing criteria. Inspecting open homes can be very time-consuming, so being prepared and taking a business approach as you prepare to spend hundreds of thousands of dollars is a wise move – fail to plan, plan to fail!
When establishing what you are looking for, I recommend you put pen to paper and initially just do a “brain dump”, listing all the elements you would like the property to have. This will include bigger picture items like location, proximity to schools and work or transport, number of bedrooms, bathrooms and living rooms, car parking, garden and so on. It will also include more specific details like timber floors, a spare room, internal access from the garage, and water systems.
Once you have a comprehensive list, I suggest you separate the items into two columns: non-negotiable and negotiable. Then make up an Excel spreadsheet, leaving space for the address, date of inspection and all the items that are on your list. Take this list with you to all your inspections and have a specific file to keep all the property brochures in so you can easily refer back to the information.
Looking below the surface
When you have a list of properties you are keen to inspect, it’s time to begin. It is useful to really read the sales material to see what features the agents want you to focus on – are they real or exaggerated?
Check the road to see if there is restricted street parking. Medium- and high-density dwellings are on the increase, therefore parking can be much more of an issue. Also, observe the appearance and quality of the other properties in the street.
Take note of the general presentation of the property, particularly what props and decorative elements have been used to present it and if it has been professionally styled. Properties that have been professionally styled generally achieve much better sales results than those left unfurnished. The intention and strategy behind this are to ‘sell the dream’. While you may be savvy enough to see below the surface, you will be competing against people who are influenced by the cool furniture and accessories.
Looking beneath the ‘presentation veil’ is essential because this is what you buy! The presentation is designed to sell you the lifestyle elements the home may deliver and take your eyes away from any imperfections that may be less apparent.
I recently assisted an expatriate client selling their property by auction. The agent reported a huge response at the first open home and by the next day had received five pre-auction offers above the anticipated sale price. An unconditional contract was signed in the evening prior to the second open home. This property was professionally styled and it sold for over $1 million, even though it needed a lot of work and ongoing maintenance. The same agent had another listing in the same area that he considered a better home with fewer potential maintenance issues, but it was not styled and was marketed empty. His open home response was minimal and the property attracted very little interest.
The ‘make or break’ rooms
Bathrooms and kitchens are very important and are often considered the rooms that make or break a sale. When inspecting a kitchen, ensure you make note of the condition of the appliances, bench tops, sink (and beneath the sink), taps, window sills, flooring, storage and bench height.
If the kitchen is supposed to be new, check if the internal shelves are also new and the drawers slide easily. You should also check to see if only the bench tops and door panels have been replaced or if the entire cabinetry is new. Understand where the kitchen exhaust ducting goes and establish if it is recirculated or taken outside.
Often the kitchen will not have been renovated. This may be a deliberate decision made by the vendor to allow the buyer to create exactly what they want. In this case, make note of where the plumbing is, the exhaust extraction and natural light sources. Notice the type of flooring and how it integrates with other rooms because a renovation may require new flooring to a bigger area than just the kitchen.
Bathrooms and laundries are generally tiled or finished in some way suitable to a wet area. If you can see that new grout has been applied, look more closely to see if there is any evidence of previous water leaks. Look for water damage, swollen skirtings, smells, and check the windows for signs of prolonged dampness resulting in mould or decay. Check under the sinks and basins for dampness and evidence of old repairs.
You’ll also want to assess the amount of storage since it is often limited and insufficient in these rooms. Check how the property works for your needs and if you can creatively enhance any shortcoming by installing clever storage elements.
Ensure the flow between rooms works for you and your target tenant demographic. Is the entry close to the kitchen? Is there somewhere to take off and store dirty shoes and coats? Is it easy to get the shopping to the kitchen from the car?
Look at the size and orientation of the rooms. Where are they in relation to road and traffic noise? How will the sun affect the temperature of the rooms and the ongoing costs of heating and cooling? Look at ceiling heights – take note of the lighting and the location and number of power points. Are there extension cords in many rooms? Is there sufficient light without the lights being turned on? Is there good ventilation within the property, perhaps cross-ventilation and external ventilation for bathrooms and the kitchen? This will impact the cost of living in the property.
It is also important to check the exterior to get a sense of the amount of ongoing maintenance you will be required to do. Are there any large trees that may create leaf litter on the roof? Are the external paths in good order?
Are there any large trees that are close to the property? Whose side of the fence are they on? What condition are the fences in? After the rain, is there any water pooling around the home? Are there any cracks in the external or internal walls? Do the doors close easily, or do they stick?
Whilst doing your inspection, keep an ear out for what other potential buyers are saying. They may have noticed something you haven’t. It also lets you know how competitive it will be in the event you wish to proceed further. Be mindful of keeping your views to yourself so you don’t give anyone else the same advantage!
Having said this, it is important to let the agent know if you’re interested in the property in order to avoid missing out if another buyer makes an offer – even if it’s listed for auction.
If the property is of interest, arrange another inspection at a different time of the day to see how things like the sun and traffic impact the property.
Ensure you have an understanding of what inclusions come with the property – they should all be noted in the contract. Check the condition of the window finishes, ask the age of the hot water service and check pool equipment, light fittings and other items included in the purchase. If you are interested in the property, request a copy of the contract.
Buying a home or an investment is a huge financial commitment and warrants a considered and detailed approach to ensure you achieve the best possible outcome. Having a systemized approach, with a written record of your inspections, serves to educate you through this process. In addition, knowing the final sale price of properties you did not proceed with will help you stay informed of current movements in the market. Happy house hunting!