One of the smartest ways to grow an investment is to take advantage of an existing investment and build on it. Rehabilitating buildings is one of these ways when it comes to real estate. You already have an existing structure, and if you’re lucky, there may even be some history to it that brings with it local respect and appeal. The only remaining challenge then is to take what’s already there and modernize it so that it is once again ready to go into public use, either as a residence, commercial space, or a mix of both.
But while this is always a strategic way to capitalize on what’s already there, it only makes sense if the profit justifies the expense. And one of the safest ways to ensure that happens is to not cut corners, and have a thorough inspection done of the building.
Unpleasant Surprises
Depending on the building, you may be dealing with a structure that is over 30, 50 or even 100 years old. During that time, there’s sure to have been a lot of wear and tear, natural erosion, and other problems that may have cropped up. If the building has been abandoned for some time, this merely accelerates the rate at which things break down, especially if it’s in an accessible area prone to vandalism or vagrancy.
An inspection is crucial to get a good understanding on the immediate visible work that needs to be done. But more importantly, a good, professional inspection should reveal whether or not there are issues with the age of the building that need to be addressed as well.
While it’s a given that buildings 30 years or less in age will likely be structurally sound and more or less in line with important building codes and standards of the 21st century, the same can’t be said for older buildings. Asbestos, for example, is illegal to use in buildings for insulation or fire safety purposes because it is now known that it has carcinogenic properties in addition to being flame retardant. However, before that medical discovery was made, it was the most efficient way to protect buildings, and many older structures may still have it in their walls. Without a proper, complete inspection, finding out about asbestos—and your legal obligation to remove it order to bring a building up to modern code—as you’re going into construction causes not only a big setback, but an unwelcome expense.
The same is true with plumbing and electrical systems. Old knob and tube wiring from earlier eras is not compliant with modern building standards. And even if a plumbing system appears to work, how much longer it will continue to do so, and the integrity of older materials, such as cast iron pipes, are all factors that need to be considered and paid for during a rehabilitation.
By doing a proper inspection of all aspects of a building, the true cost of rehabilitation will allow you to make much more informed decisions and help you when it comes time to finance your efforts through a hard money loan.