Property, like any other good for sale, comes in all conditions. But the average home or real property costs 8-10 times or more the amount of other high ticket items. That’s what makes it an investment rather than merely a purchase. Essential to ensuring it’s a sound one is getting a thorough inspection. Write right into the deal that any offer is contingent on a satisfactory inspection. And what constitutes ’satisfactory’…?
Assuming the property contains wood, first and foremost is a separate termite and pest inspection. Most ‘home inspectors’ don’t check for this, concentrating instead on mechanical and others aspects. Termites, carpenter ants, even mice can weaken walls and floors, chew through wiring, and ruin attics and shelving.
Professional inspectors check every aspect of a property and structure.
Starting with the foundation, they look for large cracks (almost all have minor ones), check for level ground, and influx of water. Evidence can show up as efflorescence — a white powdery material which indicates penetration points, mold or mildew (black stained areas). Some will use lasers to check level and cracking and some even use meters to check for radon gas concentrations.
Houses sit on top of foundations and that flooring has to be inspected for proper joints, angles, and materials used. From those floors rise walls which are similarly subject to incorrect framing and potential water damage. Inside the walls, plumbing and electrical systems are inspected for damage, non-code compliant construction, or simple age or wear. Any leaks are noted and pipes inspected for rust, lead, or other chemical concerns. Flow rate and pressure are sometimes measured.
Electrical systems get a thorough review, checking for faulty wiring, uncovered switches or receptacles, incorrect grounding, inadequate circuit breakers, or bad GFCI trips. The latter are those little red buttons often seen in the middle of outlets. They are somewhat like miniature circuit breakers built into the receptacle itself.
Working up to the attic, framing is checked for angles and strength and the area checked for air or water leaks or damage. The underneath of the roof is examined for tears or holes in papering and proper seal where vent pipes protrude outside.
Up on the roof the inspector will check for holes, loose tile, bad flashing or any other weakness that leads to lack of protection against the elements.
Around the house outside all faucets are tested for leaks and proper flow, inside all heating and air conditioning systems will be checked for duct leaks, filter condition, and adequate capacity and flow. Thermostats get a thorough going over.
Any inbuilt appliances, such as stove and water heater are checked for compliance with standards. Installed propane or wood stoves and piping are checked for physical integrity and proper function.
Carpets are checked for inappropriate levels of wear or damage and tested for mold or water damage. Any paint damage, particularly due to water infiltration, get noted.
All these items, and many more, are noted on a report available to whomever ordered and paid for the inspection. To the potential buyer, defective items can be used as bargaining chips when negotiating price and other terms of sale. But the inspection can also benefit the seller by allowing for the opportunity to repair or improve items before putting the property on the market.
To either party, an inspection for a few hundred dollars can save thousands during the process. Information isn’t just power, it’s money, too.
Filed under Real Estate by on Nov 30th, 2008. Comment. 
As population shifts occur throughout the world many are finding it possible and desirable to move from urban areas to rural, mountain, and even island locales. In that fact lies a new opportunity for investment.
Farms, horse ranches, Bed and Breakfasts, mountain and lake estates, even vineyards are increasing in value in the U.S., UK, France, Spain, Hungary and other countries. These old but new again properties represent a chance to profit from demographic changes that include an aging, but increasingly affluent, population and the worldwide political changes of the last few decades.
But before rushing off to plunk down a few thousand or a few million to cash in on the trend, consider some of the differences entailed in non-urban investments.
Rural, mountain and island areas have much more concern for and pay more attention to environmental issues. Even though in many areas or countries regulations are more relaxed, the local citizens tend to take more personal responsibility for ensuring clean water, adherence to fishing and hunting regulations, proper recreational vehicle use, etc. So, when it comes time to sell a property, potential buyers are going to be looking more closely in some cases.
In some areas population is growing due to influx of retirees, increasing use of the Internet to run home based businesses and other factors. In others, populations are declining. Research is essential to try to predict whether that great deal today will be profitable in three to five years.
Also, as non-urban demographics fluctuate it can require greater advertising over a wider area and take longer to build a pool of qualified buyers. Smaller populations means fewer buyers locally, but you can compensate by using the Internet to advertise to a larger area and attract those that are looking to relocate or purchase a second residence.
It can also take longer to find desirable properties to buy at potentially profitable prices. In areas where property values are rising rapidly, high demand snaps up good properties quickly. That leaves only those that are more difficult to evaluate as investments.
And non-urban properties are inherently more difficult to evaluate, since they’re often unique. Most tract homes and small commercial properties are very similar across the U.S. and other developed countries. Developers keep costs low by reusing the same plan and building on similar, small plots. But farms, ranches, mountain homes, lake homes, island property, etc are all different not only from one region to the next, but within the same locale. A villa in the south of France is very different from a vineyard only a few kilometers away. A large mountain cabin on a lake is very unlike a horse property a mile down the road.
Comps for such properties can only be guessed at and lenders know this, making financing more difficult. Most non-urban financiers have learned to take such factors into account, but they often require more solid credit and larger down payments as a result.
And if you plan to buy, fix-up and sell you need to take into account the potentially greater difficulty of finding qualified, reliable contractors and labor. Labor prices in such markets may surprise you — it’s not the case that lower average wages in such areas translates to cheaper help. Such specialized skills often command a greater price and involve longer time frames for getting work completed.
Just to make things more complicated, there are different regulations for rural areas, and they vary of course from country to country. Tax issues need to be factored in along with exchange rates and other Government considerations.
But despite all the potential hurdles, property values continue to rise as a consequence of urban flight — going on now for decades — along with increasing technology enabling new forms of business and employment in non-urban areas. Now’s a good time to start looking.
Filed under Real Estate by on Nov 22nd, 2008. Comment.
