Evaluating a rental property is much more than just making sure it cashflows or is a good investment financially. There are several items that you should do your best to evaluate before you make an offer. This may be difficult if you are evaluating from out of state but if you have a good realtor or contractor on your team in that location, they can certainly lend a hand and make sure the following structural items are evaluated prior to buying a rental property.
We want to put it out there right up front that we are not contractors and we are sharing the information that we have learned while purchasing our properties. If possible, please get a licensed contractor or experienced investment realtor (flipping, renovations, etc.) to walk the property if you cannot. Do not rely on Google. The photos you see may be several years old and the property could be in worse shape than it appears.
Yet, another reminder of making sure you have a good team in place regardless of where you invest. It starts with “boots on the ground” to lend a hand for inspections. For information on how to create a good investment team, check out our blog Landlording, A Team Sport
The following information is a guideline so WHEN you have the conversation with your contractor or realtor you can impress them with a little knowledge 😉 Let’s jump into the list:
Exterior
Roof
Oftentimes you’ll see in the description of the property online “new roof.” Like you, I would be excited to have a large expense already taken care of! One thing to be mindful of is how many layers of roofs does it have?
When we purchased our single family home rental we noticed it was in need of a new roof. What the bummer ended up being is that it had a total of three roofs on the home. It is common to layer a new roof over an old one but this can create issues where the roofline meets the gutters plus they don’t tend to last as long. If there were prior leaks, the sheeting likely was not pulled off and could be dry rotted if the roof leaked for awhile. Sometimes adding a roof over the old one is just adding a band aid. Not fixing the problems can lead to way more problems down the road as well as expense.
Lastly, the cost to remove them all was much more than if there was just one roof, plus dumping and garbage rates are crazy expensive to dispose of all the materials.
Materials Used
When looking at the roof, look at what type of materials were used. Try to avoid wood shingles if the property is located near a wildfire zone. According to the pro’s, asphalt shingles are the most common and best material when considering life and expense.
Of course, roofing materials change depending on the climate so make sure you have a good understanding of cost if you’re evaluating a roof in a different area of the country than you are used to living and operating your rental property business. Roofs in California are much different than those in Florida. Completely different climates, extreme rain and wind with humidity in Florida, while California has more mild weather climate but high wildfire danger.
Gutters and Downspouts
Clearly you can see if the gutters appear to be rusted or have missing downspouts. It may not seem like a big deal, but if rain water is not directed away from the foundation, it can find its way into the crawl space or basement and create a mold issue.
Foundation
For properties with a crawl space or a basement, it’s really important that you are checking the foundation and around it. Look at the foundation and see if you can find any cracks. Small cracks are ok and usually easy to fix. Large cracks with gaps may require structural repair and that adds up fast.
Many properties don’t have a foundation and are located on a concrete slab. Cracks in the slab would only be seen inside, and only if the flooring was removed so good luck with that.