Its a soggy Monday here in the district. For today’s posting I wanted to update you all on our progress in buying our second investment property. Over the past couple of weeks we submitted an offer and got the financing nailed down and we are now moving into the final stages of closing the deal.
Well, this weekend we had an inspector in to have a look at the place. The results of the inspection were not too bad – there were just a couple of electrical outlet boxes that might be bad and a minor issue with a heating duct. That said, the inspection process was revealing in two respects:
1) Current conditions in the DC market allow buyers to demand repairs. For those new to the DC area, the past 5 years have been marked by a boom and sustained higher prices relative to before 2003. But things appear to have cooled off a great deal relative to then. For example, back in 2006 it was a real estate feeding frenzy – for a lot of properties there would be 5 or 6 buyers. As you can imagine, its hard to ask for repairs when there is a bidding war. So, in the past a buyer often had zero negotiating leverage to ask that maintenance be conducted. This is definitely NOT the situation now. For example, for this property we are the only buyers and the place was on the market for 6 weeks before we made an offer. Thus, DC market conditions currently appear to favor buyers allowing them to make demands regarding repairs.
2) Assumptions about upkeep. I used to believe that most people are essentially hardworking types who would take good care of their property. After having been through the inspection processes 5 or 6 times now, this no longer seems like a safe assumption. Instead you should probably assume there is something wrong with the property you are buying. Thus, you need an inspector to find out what is wrong with it.
In every property that I’ve looked at, there has ALWAYS been something that requires attending to. These can range from needing full renovations, to extreme insect infestation, to bad electrical work, faulty workmanship, or even to the effects of neglect and age. People just don’t keep up their property as well as you might think. More importantly, some repairs can be quite expensive. For example, water problems or roof work can run into the thousands of dollars. You definitely don’t want to get stuck with those kinds of issues.
Again, in every case there has always been something wrong with the properties I’ve looked at. Its not a safe assumption to buy a place with the belief that everything is okay. There will be something wrong with it – and you probably need an inspector to tell you what exactly is wrong with it and how much it will cost.