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 Step #8 - Evaluate The PropertyThe physical evaluation of the property will serve two purposes. First, it will help you determine the condition of the property you are buying so that you can plan and budget for immediate repairs and long-term improvements. Secondly, the physical evaluation gives you a basis for negotiating the best possible price. Unless you are extremely confident of your inspection and contracting abilities, you should hire a specialized property inspection service to evaluate the physical condition of the property. If possible, you want to work with inspectors whose full time job is inspecting and who know all the trouble spots and the telltale signs of potential trouble. You are investing tens and hundreds of thousands. This is no time to try and save a few dollars. Expect to spend two to five hundred dollars, depending on the size of the property and the scope of the inspection.
Property inspection firms will be listed in the Yellow Pages and you may see some ads in the real estate section of the newspaper. Be careful of firms that advertise a free or very low fee. They're probably looking for contracting work and won't be as objective. Your best bet is to contact Jones or Nardo, who will have a list of firms that they have used and can recommend. Your Mastermind Alliance will also have suggestions.  After reading the report, if there are any real or potential trouble spots such as an old heating system, inadequate wiring or poor insulation, use your Mastermind Alliance to call in a specialist. Most contractors will give you free advice and repair or replacement estimates. Make yourself four lists. The first list is for immediate repair expenses you will incur after the passing of papers. The second list covers work to be done within six months such as painting, wallpapering or landscaping. The third list contains replacement cost estimates for the first two years of ownership such as a new roof or new wiring. The fourth list covers the major improvements you plan to make in the future such as remodeling kitchens or baths, replacing the roof, adding to the parking area, etc. At this stage, don't get carried away or overanxious about estimating these repair and remodeling costs. Yes, when you actually have the work done you will want to get and compare a number of different estimates. For now, a general understanding of costs is sufficient.  The second method for evaluating a property is to compare income and expenses on paper. Nardo will be able to help you here. First, work out all the figures on paper. Nardo will be able to help you here. First, work out all the figures in the least advantageous way to you. Figure on the highest prevailing financing rates and be very conservative in listing the expense numbers. If you're buying an income property, be sure to add a realistic vacancy allowance. Be sure to include the immediate repair figures from your first list. The bottom line is to find the maximum amount of expense or the least amount of cash flow this property will generate. Next, re-evaluate the property on paper to your maximum advantage. Use the lowest feasible price as your sales price. Figure on the best financing available. Your expense figures should still remain conservative. If you're buying an income property and will immediately raise any rents, use these new rents for your income figure. The bottom line is to find the least amount this property could cost you each month or the most amount of potential cash flow. Continuing Education: ReLibrary.com The Real Estate Library contains essential resources for buyers, sellers, home owners, real estate professionals, and anyone seeking to connect with the world of real estate. Go to Lesson 5
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