Use a Seasoned Eye to Spot Defects in a Distressed Property

Use a Seasoned Eye to Spot Defects in a Distressed Property

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Investing in a distressed property can be a strategic move. Distressed properties allows you to sharpen your investing skills as a real estate investor and cultivate value in your portfolio.

While distressed properties often have the greatest potential for return on your investment, they are also some of the riskiest investments you can make.

Table of Contents - Use a Seasoned Eye to Spot Defects in a Distressed Property

To minimize your investment risk consider the most common risks below. By reading over them, you can turn your risky investment into a profitable one.

It doesn’t take an expert to see these potential problems for what they are, but it does take a careful eye to spot them. Especially if they’re being hidden from you on purpose.

Most common issues found at distressed properties

When you purchase a distressed property, you don’t expect everything to be perfect. But, you have to be mindful of the kinds of repairs that are necessary to rehab the property.

Buying a property that needs extensive repair and rehabilitation might cause you to exceed your budget and over spend on the home.

It's important to understand the most common issues when investing in distressed properties. Understanding the issues can help give you a better idea of what to look for and what to avoid.

Here’s where to pay very close attention;

Plumbing issues

Distressed properties are notorious for having plumbing issues that can be difficult to identify at first glance.

Plumbing leaks can be found anywhere in the home. You might not be able to find the source of a leak until it becomes a major problem.

You should pay special attention to the condition of the plumbing system in the property you are considering purchasing.

Failing to identify any plumbing issues within the house, you can check the water meter to help you determine if there are plumbing issues.

Turn off all faucets and appliances, and check the water meter. If the meter is spinning, then you potentially have plumbing issues.

Additionally, you can bring a moisture sensor with you when inspecting the rental property. A moisture sensor can help you find leaks within the walls.

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Water damage

Water damage is one of the most serious issues that can occur in a home. It's always easy to spot if you don’t know what to look for.

Besides obvious leaks and water damage out in the open, keep your eye out for mold growth. Mold can grow;

  • underneath sinks
  • near water lines in the basement
  • in the attic from the roof
  • under flooring

Water damage also can cause warped flooring in and around bathrooms and kitchens.

Keep in mind, water damage may not necessarily be a plumbing issue. Bad grading on the property can leave it vulnerable to flooding and water intrusion after a storm. Or, a previous one-time plumbing incident may not have been properly re-mediated, leaving behind lasting issues.

Water damage can we visible and structural. If you see spots on the ceilings in any rooms, this can be a sign of a previous leak.

Also, try to use your nose and smell around and see if you can smell anything musty. Usually a damp property will smell musty. This musty smell indicates potential water, or plumbing issues.

Broken sewer lines

A broken sewer line can be an incredibly expensive and labor-intensive issue to repair. Sewer lines can be damaged by debris being flushed into the system, overgrown tree root systems or erosion. Regardless of the cause, you don't want to get stuck with a property that has a broken sewer line.

You can’t easily look at the sewer line to see whether it’s in good condition. You will need to look for signs of damage from the surface.

Check for any depressions around the line that indicate erosion and line collapse. Also pay attention to greener grass growth above the line that indicates a leak and look for signs of digging nearby.

Also, if you're doing a home inspection, you can bring a plumber with a camera and run it into the sewer line. This does come at a cost, so try to only have your plumber if you are serious about a certain property.

Pests

Dealing with a pest issue is the last thing you want to do after you purchase a distressed property.

Depending on how long the pests have been on the property, it may be challenging to get rid of them.

By the time you identify and eradicate unwelcome guests, chances are that they have already done damage to the distressed properties structure and foundation.

You can look for rotten wood, sawdust, tiny holes and other signs of nesting and burrowing. These signs indicate the presence of pests in a home.

Another great tip is to ask the neighbors how the pest are. Often if your neighbor is having pest issues, so could you.

Wiring problems

Electrical wiring is incredibly important in a home, but can also be incredibly dangerous if it isn’t in good condition.

Electrical wiring that’s old and corroded doesn’t have the capacity to support the electrical needs of a property can cause an increased fire risk.

Find out as much as you can about the existing wiring at the property. You can avoid purchasing a home if it needs extensive wiring installation and repair, if your not financially ready to update it.

Check the electrical panel and wiring that is exposed to get a general idea of the condition of the wiring. Stay away from knob and tube wiring, or expect a hefty bill for replacement.

Keep your wits sharp while you inspect

Investing in a distressed property can be a great choice, but extra caution is necessary to ensure your investment pays off.

Taking the time to inspect a property and check for major issues before you buy can save you a headache and financial loss.

Here's the top 26 most common house defects and how to spot them


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Scott Dillingham

Scott Dillingham

I have been investing and lending to real estate investors for nearly 10 years now. After thousands of successful deals between flips, rent to owns, student properties and commercial assets I have developed a deep knowledge of real estate investments and have a passion of sharing this information with the world! If your looking for a lender who specializes in rental property financing you're going to want to connect with me at team@lendcity.ca.