Anyone who has purchased a house knows the importance of a home inspection, and this practice is equally critical when you purchase a single-family home as a rental investment. While the basics of the home inspection process are the same for investors and personal buyers, investors should evaluate inspection results differently than personal buyers.
Because single-family real estate investors may not see a property before they complete a purchase, the inspection report is particularly important. Investors who understand how to interpret inspection results will be better equipped to make the informed investing decisions that lead to higher yields and a bigger return on investment.
The process
A property inspection is one of the first steps in the homebuying process, and provides a buyer with important information about a property’s condition. Property owners will often pay for a preliminary inspection to present to possible buyers, but a savvy investor will always fund a separate inspection on their own. Inspectors will examine a home’s plumbing, electrical system, structural integrity and physical appearance. After the inspector completes their overview of the house, they will present their findings to the buyer.
The sheer amount of data contained in these reports can be overwhelming, particularly for investors who are just entering the SFR market. Every possible problem with the home will be listed, and it can be difficult to separate serious issues from minor flaws that can be ignored. If an inspector discovers problems that would be particularly costly to repair, it may be a sign that the house is not worth buying, or that the price of the home is too high.
What makes investing different?
Many investors mistakenly treat their investment properties like homes they will inhabit. This is an easy way to overspend on repairs that will not offer a significant return over the long term.
Investors who purchase a SFR home should try and put as little money into the property as possible. The less an investor puts into a home upfront, the faster he or she will start to reap income from rental payments. An investor should evaluate what repairs are necessary against subjective improvements that might make the home more visually appealing or comfortable.
Necessary repairs, such as improvements to a house’s structure or utilities, bring the home up to a rentable state, and should be viewed as part of the home’s cost. Subjective repairs, such as new carpeting or improved kitchen countertops, should be avoided. These changes might make life in the house better, but they will not substantially increase the home’s value or provide a major boost to the amount of rent an owner can charge. These changes represent a trap for investors who treat rental properties like their personal homes.
How HomeUnion helps
HomeUnion’s experts guide investors through the inspection report and illuminate the actual costs of necessary repairs. If the home’s issues are extreme and could force the investor to take a loss over the long term, HomeUnion’s team may advise the investor to consider other properties. In the unlikely event this occurs, HomeUnion investors have access to hundreds of other properties through the company’s website, and should easily be able to find a new property that meets their desired ROI.
Investors who work with HomeUnion can take advantage of financing through an in-house lender and receive stress-free property and tenant management. An online portal provides quick access to relevant information about all of an investors properties, and HomeUnion can even help with the sales process when the investor decides to divest him or herself of a property. Real estate investing can be intimidating, but HomeUnion makes the process simple, starting with the inspection. Register on HomeUnion’s site to look at prevetted properties and learn how easy SFR investing can be.
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