February 17 2017
If you are a real estate investor, chances are that during the course of your journey you have come across a property or two that has been in distress. And often times you will see this is a good thing because it provides you with an opportunity to make a great deal on a fixer upper. Whether this be a single-family home, or a multi family home a property in distress can often be one of your biggest moneymakers. However, there is that little annoying issue of the hidden problems in distressed properties that you can't see until after the fact. It's these issues that can lead to big losses down the road if you do not recognize them ahead of time. Therefore, in this article we will address the most common hidden issues within a property, and how you can learn to detect them.
1. Termites & Carpenter Ants
Any homeowner knows how destructive these little annoying pests can be, especially if they are left unchecked for a long period of time. Even when you do get rid of him, they could have still left behind an extensive amount of damage that you now have to fix. And while you can sometimes recognize bug damage, often times it remains hidden and unknown until your contractor starts to do the renovations. So, the key here is to recognize different elements that can point to whether or not there is a pest issue.
Rotting wood is probably one of your biggest and most obvious signs that there is a termite issue. Another sign that you can look for our random, yet small, piles of sawdust in different places, as well as little holes in the walls, or within the wood. Also, if you see tiny tubes of my mud that run up the wall, this may be a sign of carpenter ants. If you have a lurking suspicion that something may be wrong, take your time in further inspect the walls in order to deduce the problem.
2. Water damage
Water damage can often lead to some very expensive repairs. Whether it's just from a small drip that is behind a wall, in a roof, or under the house, water can produce major damage before it even starts to show that it's there. However, there are some signs that you can look for to see if there is possible water damage within the structure of the house. For instance, you can look for mold, you can check to see if there is any give in the floor near the toilets, tub, or sinks. And you can also try and look under the house to see if you find anything out of the ordinary such as standing water or discolored joists.
3. Sewer Line Collapses
As much as you would like them to, sewer lines won't last forever. The years of flushing will eventually wear them down and since they are underground you won't be able to see them. Therefore, it's difficult to know whether or not they are damaged or need to be replaced. However there are clues that you can look for it in order to see if a sewer line needs to be replaced. For instance, you can look for small depressions in the yard such as a sinkhole, a random patch of green grass in a brown yard, or any signs of obvious signs of digging in the yard where a sewer line might be located.
4. Electrical & Natural Gas Problems
These are perhaps probably the most dangerous issues that can arise when it comes to the hidden problems in a distressed home. Often times, when you are looking into a house the utilities are off, which makes it impossible to detect any form of gas or electrical issue. Unfortunately there isn't much you can do here, except hope that everything is okay, or that the fixes will be minute.
These are just a few of several hidden issues that can come with a distressed home. But, it shouldn’t discourage your from purchasing one. All you need to do is be wise and budget about 10% of the total rehab budget using multifamily leasing technology to “oops” factors, like these stated in the article. If you do, you can set yourself for having enough cash to cover any surprise expenses that may arise, which will in turn set yourself up for success.
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