When investing in a rental property in PA, the incentive is often to find something with a very low purchase price to increase the profits from the rental income. In most cases, investors looking at single-family homes at rock-bottom pricing are looking to purchase through a sheriff’s sale, an REO bank-owned house, or a private owner who is very motivated to sell. In other words, these are not properties that have been prepared for sale, and those frequently come with hidden problems. Here’s how to reduce your chances of getting burned when purchasing a rental property.
1. Always Conduct a Thorough Inspection
Start by choosing a certified home inspector, preferably one who comes recommended by someone you trust. Like every other profession, certification matters along with experience and integrity. Aside from a thorough general inspection, you’ll want to hire separate experts to check for these specific problems:
- Termites. The inspector will need access to all walls, especially any areas that meet a slab foundation. Crawl spaces and basements must be accessible, along with attics and all sinks and drains. The inspector will be looking for current infestations along with conditions that could lead to potential ones, such as plumbing leaks and wood-to-soil contact in the home.
- HVAC. If the boiler or furnace system is more than ten years old, an inspection from an HVAC company will let you know whether replacement is right around the corner or if the system has life left in it. Many companies provide an inspection as part of a routine tune-up of the equipment, so be sure to mention that this is contemplation of purchase so you’re not paying for unnecessary services on a home you may not buy.
- Plumbing. Spiteful previous owners who are forced out by the bank may clog drains with rags or other debris. Merely running the water may not be enough to detect any issues that have been forced down the pipes. Have a plumber scope all drains as well as check fixtures, supply lines, sinks, and showers. It’s also critical to inspect shut-off valves, sump pumps, and discharges, along with a video inspection of underground drains and sewer lines.
2. Check for Code Violations
It can be easier than you think to learn about hidden issues within a PA property you are interested in purchasing. Check with the city, township, or other governing bodies to see if there are open violations that have never been cleared up through the city. For example, a pipe that runs from the street to the home could be leaking, and this is an issue that’s impossible for an untrained eye to see and one that’s not detected on many types of plumbing inspections. Other examples include permits that were pulled but never closed, drain blockages, or problems stemming from neighboring properties.
There are many types of code violations that will prevent the home from being sold before they are fixed. For example, any extreme safety violations such as structural failures would typically need to be remedied before closing. On the other hand, many code violations are simply the result of a home aging. For example, GFCI outlets are required in kitchens in most locations, but many kitchens do not have them as they were built or remodeled before this requirement. Most of the time, these code violations only become a priority when the specific area is being worked on and are otherwise fine to leave as-is.
Pay careful attention to the code violations. Decide whether they are severe enough to require fixing before closing or if they’re better used as bargaining chips as you settle on a purchase price for cheap rental property.
3. Talk to the Neighbors
Nosy neighbors can be a hassle most of the time, but they are a tremendous asset for a home you do not intend to live in. Even peaceful neighbors tend to notice when things are happening in the neighborhood and can be a great source of information on a property you are considering. You can learn a lot about the people who used to live in the home, which may give added information on some problems within the home, such as identifying stains from pets or damage resulting from rowdy children.
Neighbors can also provide information about conditions in the neighborhood and whether they may have affected the home in the past. For example, has the area experienced any major or minor flooding? Has a tree fallen on the house requiring extensive repairs? Was illegal activity conducted in the home or neighborhood?
Another thing to consider is a neighbor that may be a little too much of a busybody. If you plan on renting your property to families or people with pets, for example, the last thing you want is to receive constant calls from a neighbor who cannot stand the sound of barking dogs or playing children. Although everyone involved in this hypothetical situation is well within their rights to children or pets and to complain about them, it’s still a hassle that’s better avoided than fought.
Do Your Homework
In many cases, homes that are below the typical price range are usually for sale for a reason. As an investor purchasing a PA rental property, your job is to be the detective and do the work to discover the reason for the property to sell so quickly and if it greatly affected the condition of the home. That way, you can be sure you’re making a sound investment that will pay off for years to come.
If you need help with inspections or finding a property in PA for sale, contact our team at Bay Property Management Group Philadelphia. We’re the experts in the Philadelphia area and can help you through the entire process.