Real Estate Property Walkthrough Guide: What to Look For
Doing your first real estate property walkthrough is going to be one of the most exciting activities when purchasing an income property. However, don’t let the excitement get to you because you don’t want to make any mistakes here. In my previous article, you learned how a lawyer can assist you throughout the property purchase process. However, the walkthrough is something you have to master on your own.
Keep in mind that the property walkthrough is an important step of the process - this is your chance to take a better look at the property and decide whether it’s worth the investment based on its condition.
During the walkthrough, you are most likely going to find issues with the property that you can use to your advantage when negotiating the final price. However, there are certain issues that must not be overlooked, such as critical water damage or foundation problems.
If you come across serious issues that could only cause headaches and cost you a lot of money later on, you might want to back out of the deal before you’ve gone too far. With that said, the property walkthrough is most likely going to be the most important part of the entire process of purchasing your first income property.
Real Estate Investing Guide: What to Look for During the Property Walkthrough
Here’s an overview of what you should be looking for when doing a walkthrough of the property:
#1 Water Damage
Water damage is by far the most important thing you should look for when investing a property. No matter big or small, any kind of water damage can lead to serious headaches in the long run. Water damage is the major red flag to look out for. Stains on the walls and ceiling are usually an indicator of a possible water issue.
#2 Check the Insulation
Checking the insulation during the walkthrough can be a challenge because it’s located in-between the walls and it’s not always visible on the surface. In many cases, you can check the insulation in-between the rim joists on the ceiling.
The different types of insulation you should be familiar with include:
Batt - Fiberglass insulation
Cellulose insulation/Loose-fill insulation
Spray foam insulation
Vermiculite insulation
UFFI insulation
#3 Asbestos
As a naturally occurring fibre, asbestos was widely used in construction before its dangers became known. Back in the day, people didn’t know about the health risks involved with the use of asbestos in living environments. Although this toxic material is no longer used for insulation in construction, properties built before the 2000s might still have plenty of it hiding behind the walls. Finding asbestos in a property is a huge red flag that should not be overlooked.
#4 Foundation Issues
Depending on the date of construction, the property you’re looking at might have foundation issues that could turn the renovation and sales process into a nightmare. It is important to assess the condition of the foundation and look for any cracks surrounding the property.
With that said, here’s what you should be looking for:
Cracks in basement walls or around door frames
Uneven or bouncy floors
Gaps between walls and floors
Nails popping out of walls
Cracks in bricks or stonework
Leaning front porch or stairs
Cracked or leaning chimney
Gaps around windows or door frames
These are all signs that the foundation of the property might be compromised.
#5 Check the Exterior of the Property
Besides the foundation, you should look at the rest of the property’s exterior, including the roof, eaves and downspouts, and windows as well.
Roof
- Check whether the roof tiles are starting to peel up. In that case, they might need to be replaced, which will be an additional expense on your end.
- Keep in mind that asphalt shingles last on average 20 years so make sure to ask for the age and whether they had put down the ice and water shield.
Eaves & Downspouts
- Assess the condition of the eaves because when the eaves separate from the home, you’re most likely going to have to install the hangers and do some repairs. When the eaves start to rust and break, they will need to be replaced.
- While you’re at it, make sure that the downspouts are 6 feet away from the foundation to avoid water damage.
Windows
- Lastly, check the condition of the windows and whether they will have to be replaced. When it comes to expenses, we’re looking at around $300-$500 per window for the materials and an extra $500-$700 for installation.
#6 Issues with the Electrical System
When it comes to checking the electrical system, the first thing you should do is look at the plastic coating around the electrical to see what type of wire it is (either aluminum or copper). The indicators of a compromised electrical system include:
Exposed wiring and splices
Undergrounded three-prong plugs
Painted outlets
Double Tapping of circuit breakers
Reversed Polarity
Improperly modified electrical panels
Knob and Tube Wiring
Aluminum Wiring
Federal Pacific breaker panels
No GFCI protection
Missing knockouts in panels
More than one neutral wire in a slot
Wiring against sharp edges.
#7 Plumbing Issues
Redoing the plumbing can cost you thousands of dollars. It is important to remove this risk at the very beginning so make sure to check if there are any plumbing concerns on site. Head over to the basement to check the type of plumbing.
The most common plumbing issues you might run into are:
Broken or Rusty Pipes
Clogged Sewer Line
Running Toilets
Hidden Leaks
Broken thermostat
High Water Pressure
Sediment Build-up
Rust
#8 Insect and Pest Infestations
Beetles, termites, and other types of wood-destroying pests can cause serious issues in the long run. Spotting any pest infestations before it’s too late will help you deal with the problem while it’s still fixable.
Although they may seem small, pests can do some serious damage to a property. Whether you’re dealing with ants, rodents, or termites, you will have to act fast before the damage affects the home’s value.
Signs of pest infestations you should look for include:
Pest droppings
Evidence of nesting
Grease marks and grease tracks
Physical damage to structures
Damaged plants
#9 Issues with the HVAC System
When it comes to inspecting the HVAC system, look for:
Dirty air filters
Rust around unit
Open seams in flues or slopes up to chimney connection
Combustion gas order
Cracked ductwork
Asbestos
Depending on the area, you will come across different types of heating.
Oil Tanks (not ideal, depends on where it is. It could cause an environmental issue if it’s leaking).
Boiler/Radiator (usually for multi-flex’s)
Electrical baseboard (electrical used to be cheaper than gas, but now it’s more expensive)
Forced Air Gas Furnace (most ideal). There are many extensions with the furnace now (ex. A/C extension). However, some areas do not have natural gas.
When it comes to water heating systems, check to see if it’s paid off. A new water heating system would cost you around $600-$1500.
Other things to keep in mind:
- The rust on the outside isn’t a major issue as the thickness of the heater is large.
- The age of the water heater isn’t that important either.
#10 Check Walls, Ceilings, and Flooring
Lastly, you should look at what’s going on with the walls, ceilings, and flooring within the property. If you’re dealing with ceiling tiles, keep in mind that these can be made of different materials, including the cheapest options such as paper.
Check what types of walls you’re dealing with. Keep in mind the following:
- Wallpaper ( it is recommended to remove the wallpaper entirely. If it’s difficult to remove for some reason, you can always drywall on top of it.).
- Plaster walls ( these are okay to keep but keep in mind that plaster walls might crack more over time, especially with temperature change. This, however, depends on the condition of the plaster wall. Don’t remove it unless it looks really bad because it’s expensive to replace. Some houses have wallpaper on top of cracking plaster to make it look better).
Last but not least, don’t forget to assess the condition of the flooring within the property. The types of flooring you will most likely come across include:
-Hardwood (you might have to sand down the hardwood and varnish it if it’s not looking good)
-Luxury Vinyl-plank (waterproof). Recommend using this if you need to replace floors.
-Vinyl-tiles (remove them and beware of asbestos tiles)
-Porcelain or ceramic tiles could go in the bathroom or kitchen.
-Porcelain tiles that look like marble are very nice for the bathroom.
-Backsplashes could be subway tiles, mosaic tiles, porcelain or ceramic – it’s a matter of personal preference.
- Carpets are hard to clean and turn off a lot of people. Stay away from them.
- For basements, use Dricore subfloor under the luxury vinyl-plank to keep the basement concrete floor warm.