Would you buy a house with structure damage if you intend for it to be a rental property?
April 28th, 2010 | 
Author: There is a cheap fixer upper in my area, I’m afraid the inspector is going to say it has structure damage because it’s on a hill. The house is also 50 y/o.
The house is by far livable. Just when do you know “it’s too much” to handle when you’re wanting to make a few bucks in the long run?
*I’m buying my first property in the very near future! In cash! I’m only 22 but I grew up watching my uncles make a killer living off rentals.
Posted in Rental Properties
there is nothing cheap about a fixer upper. i bought a house that was already fixed, and two years later I am still repairing.
If the structural damage causes trouble for your tenants you could have liability issues.
What are the long term projections for the damage…will it worsen and need repair, is the repair doable, affordable?
If you need to sell this property down the road is that a possibility or will these issues make that difficult and you’ll be stuck with a house that you can’t sell?
Does the damage affect the rent you can charge? Is there in any way a safety issue? If yes then run for the hills.
Can you get an estimate on the cost to repair this house and make it safe and valuable in the future? Can you negotiate these repairs with the current owner?
Is the property mortgageable? You may pay cash today but wish to mortgage later, if you can’t get a loan on it at any point I’d forget it. If the house is going to only appeal to high risk tenants I’d forget it.
Good for you, I wish you lots of success, but that first property needs to be a winner and it seems you have ample reason to doubt.
Never go against your gut feelings–best wishes to you–the world needs more ambitious smart 22 year olds!
Get advise on the running costs for this house, especially the repair work. You will have to do some math and work out something like: gain=(rent-income tax)-(repairs-tax deduction)
You will have to talk to builders, handymen, accountants, and realtors for the above.
The building inspector will advise you on the cost of structural and other urgent repairs and obviously you can use this information to haggle with the vendor.
It depends on where you are living. People in poor places can live just under “shelters” provided that they have a roof on their heads. In richer places, people prefer to live in well-made houses. Just look at your surrounding and judge the place. Remember that location has also a very big role to play.
It is most important that you listen to the inspector, especially if he says the potential for structural damage is there. I’ve worked in the building re hab business, and sometimes what looks like minor damage, is actually major damage as you pull it apart. At 22, I can’t imagine that you have the Carpentry experience require to do major structural repairs, so please be careful. Cosmetic upgrades are fun and give you great experience, but watch out for the following 1] Termite damage, especially on the sills the house rests on, 2] Electrical upgrades probably required on a 50 year old home to bring it up to code before renting 3] Water damage around the base of toilets, and tubs 4] Roof replacement coupled with Rafter and joist replacements……….ask the inspector to brief you on his findings regarding these items. Finally, talk to your uncles who have done this before you, take them to the property, use their experience to save yourself grief.
Bad Idea Plastic trees,
I bought a house that was structurally sound and only needed cosmetic updates and I am still making updates and spending money on it now. Rental properties in decent condition need ongoing maintenance, I could’nt imagine buying one that has significant problems right from the start.
Consider 2 things;
1) Your liability – If you get sued by a tenant over something that you knew was structurally negligent, you will be at fault and legally liable.
2) Your ability to sell later – Not many people will buy a house that they know is structurally damaged. That’s like buying a ticking time-bomb with a broken clock.