Purchasing an investment property is nothing like buying your primary residence, at least that’s been my experience so far here in the Detroit investment market. For starters, there are generally very few photos of the property, often times no interior shots. Next, if the home is tenant occupied (often time it is), you’re generally required to have an accepted offer before seeing the property.
Having never purchased an investment property before, that last one was a head-scratcher… how am I supposed to put an offer in on a house if I’ve never even seen it? That’s crazy, right?!
Not entirely.
Once I understood the reason and the stipulations, putting offers in on properties without seeing them became easy. If a home has a tenant in it people generally want to avoid inconveniencing that tenant as much as possible. Often the tenant doesn’t even know the house is up for sale and the owner likes to keep it that way for as long as possible.
So requiring an accepted offer before inconveniencing the tenant and tipping them off makes a lot of sense. The seller also wants to make sure they aren’t showing the house to a bunch of tire kickers. Finally, your offer (at least everyone I’ve written with my agent) generally contains an out: you have 48 hours to withdraw the offer after initial walk through.
So there’s really little risk in submitting an offer before view a home.
On this particular property we offered $45,000 all cash. The home was listed with just a few photos for $54,900 and was apparently bought for $1,400 in 2012 at what I can only assume was a tax auction of some sort.
The offer was accepted without counter. This made me nervous even though I knew I could back out. Oh, and did I mention we waived the inspection? In hindsight I shouldn’t have done this but I took my agent’s advice who claimed that since it was section 8 certified and inspected an inspection “would be a waste of money”. He convinced me that the section 8 inspection is far more rigorous than a normal inspection, so there was nothing to worry about.
OK!
Yes, I realize this sounds ridiculous and naive, but that’s how it went down. I’m still not sure if what he told me is true, but I’m sure I’ll find out.
Back to the house.
The first thing we recognized was that the home needed a roof, like immediately. My agent said it’d probably be about $6,000 to do that. Sounds cheap to me, but what do I know? Beyond that the exterior looked to be in great shape. The home was built in 1931 and is all brick. It’s amazing how well it’s held up knowing that it’s almost 90 years old.
When we stepped inside the house the first word out of my agent’s mouth was “wow!”. It was in surprisingly good shape. The hardwood floors looked well cared for, the fireplace looked like something I’d see in an apartment in San Francisco, and everything was just in great shape.
There was some water damage in the kitchen ceiling, and the tenant told us that was caused by a water leak in the upstairs bathroom about three weeks ago. They’d come out and fixed the leak, but the drywall clearly needed some repair. Beyond that, the house was in amazing shape.
We walked back outside, stood back and took in the house from the street once again. There’s a tree in the back of the house that’s healthy, but it’s growing at an angle and sitting over the house. It will need to be taken down at some point. To make matters worse it sits near a power line, so it’ll be tricky (and costlier) to remove.
The left side of the house’s flashing clearly had some previous issue because it looked like it’d been painted black. My agent noted that it was probably flex seal or something along those lines. The home’s windows are also incredibly old. It’s hard to imagine they’re original, but it’s also hard to imagine they aren’t.
The flashing and windows gave me pause (windows aren’t cheap), but my agent assured my I really wouldn’t have to update the windows for a long time, probably only if I wanted to sell the home to a retail buyer.
Regardless, I wanted to amend our offer to $40,000 to account for the roof we’d have to replace. I also wanted to have an inspection contingency largely because of the flashing. I really wanted to know what was going on there and how much it might be to address.
We signed the new papers today and sent them to the listing agent. The owners live in France so it will likely be a couple days before we hear back.
Fingers crossed!