A relative told me recently that when they moved into their PPOR they found a huge patch of different coloured paint on the bedroom wall. The previous owners had lazily decided to paint around the padded bedhead rather than remove and replace it !! Talk about taking the easy option.... In the same house they also discovered a square of missing carpet where a large electric heater had been standing upon inspection. Tricky indeed. Without the carpet in production, they were forced to recarpet the entire room. It does pay to move objects when you're inspecting premises, especially if there is something suspicious about placement or if you feel that cover ups are occurring. Other examples that I've seen/heard of include the following: * Bathmat hung over side of bath to hide surface damage * Rugs to hide carpet and flooring stains (very common) * Posters and pictures over holes in doors or walls. * Appliances/homewares hiding kitchen bench damage/discolouring * Childlocks on doors hiding water damage to internal cupboards The biggest and most difficult cover up to detect, obviously, is anything under a layer of paint. Mould and mildew, cracks, recurring stains etc can all be disguised at least temporarily with a tube of polyfilla and paint. Building inspectors have so many disclaimers in their reports these days that it pays to take a second, third and even fourth careful look at the quality of the product before you buy when it comes to real estate.
When you think about issues like this, it makes a sight unseen property purchase even less desirable.
It is an interesting phenomenon ... and completely understandable that people are generally put off by such things that are not quite perfect. Let me relate my own story as a contrast ... My first IP purchase was in Adelaide - a pair of townhouses that had been converted to units (4 units total). I had driven past them while visiting an open inspection down the road, read the for-sale sign, and contacted the agent about them. Unfortunately, I had to fly back to Sydney the next day, so I was unable to arrange an inspection of them. After negotiating what I considered a good price (9.6% yield), I arranged for a building inspection and at the same time, a friend of mine (also a real estate investor) to have a look through and give me her opinion. The inspection report was filled with the usual disclaimers, but pointed out nothing seriously wrong - just a few things that would need attention soon, plus others that were likely to cause problems in the long term. My friend said, they were not perfect, but would do the job nicely for an IP. So I bought them - sight unseen. When I finally got around to inspecting the units - I was horrified. The upstairs units were okay (very 80's exposed brick, but fairly large and bright), but the downstairs units were dark and cramped ... and not terribly pleasant in my opinion. I'm not saying they weren't fit for habitation, but I have fairly high standards when it comes to accomodation ... and these certainly weren't places that I would live in myself. They were safe and clean, and we strive to keep it that way. Then there was the maintenance. With four sets of tenants in the property, there was always something that needed fixing. There were some serious problems such as poorly grouted tiles in the upstairs laundries which leaked through to the downstairs units, plus some bad wiring and such ... and we always seemed to be forking out money to make repairs (two ovens in two years, three retiled bathrooms, complete re-wiring of one townhouse, broken tiles on the roof causing leaks, gas heaters not working, etc etc). There were a number of times I felt like giving up (not so much from the repairs - but from problems we were having at the time with our property manager ... but the repairs issue was also a concern), but when I did a thorough analysis of how much we'd spent on the place versus how much income we were getting ... we were still making money !!! Then to make things worse, I started a round of refinancing. The valuations were surprisingly good, and then 2 years later they were incredibly good. These properties more than doubled in value in less than 5 years (based on bank valuations). So not only were they cashflow positive (based on original purchase price and a 90% LVR), they were also showing great capital growth. Now, the rents have skyrocketed because they are in a fantastic location (minutes walk from large university and hospital), and there is a really huge demand for property in that area. So, despite these properties being far below what I consider "great", and feeling like I'm always spending money on them - and generally disliking the whole place ... they have actually been by far my best investments. If I had inspected them, I don't think I would have bought them. Now don't get me wrong - I'm not saying that you should (or shouldn't) buy properties sight-unseen ... and I'm not saying you should (or shouldn't) buy properties in less than perfect condition ... and I'm not saying you should (or shouldn't) pay attention to those small details and cover-ups ... I'm just telling my story. YMMV. At the end of the day - provided you have bought well, in a good location, with good prospects for growth and/or rentability, and provided there are no structural or legal problems with the property ... these minor issues, while they will hurt your short term returns and are a pain to deal with ... may not actually mean that much in the longer term. Spending a couple of thousand dollars to fix a broken bath is fairly insignificant when you get hundreds-of-thousands of dollars of capital growth over the next 5+ years. But it's still a pain to have to fix it
* Bathmat hung over side of bath to hide surface damage * Rugs to hide carpet and flooring stains (very common) * Posters and pictures over holes in doors or walls. * Appliances/homewares hiding kitchen bench damage/discolouring * Childlocks on doors hiding water damage to internal cupboards Or conversely some fantastic ideas if we are trying to offload a dump!!
Thanks Sim for sharing your personal story, it was a great post and i am sure i will remember it in the future. ;-) coopranos i hope i never buy a property off you!!
I remember when I was a young fella looking for a car my mate suggested to offer to wash the car for the seller ... He said amazing what faults and blemishes you find when you give it a proper inspection. Along those lines I reckon the only way you'd ever find some cover-ups in a property is live there a couple of days One thing the seller can't cover up is the land value, so they might think they 'fooled' the purchaser covering up the side of a damaged bath, but who'll have the last laugh in 20 years when the buyer is the one who captured all the capital gain ?
This is a really great point, and even more reason for you to look over any property with as fine a toothcomb as possible. It's amazing what you can miss when you're being accompanied by a REA and attempting to talk and inspect at the same time. That's why Theresa and I like to take second looks together - she gets to look and I get to talk (what I'm best at ) Taking pics can also help though this can be overkill unless the property tickles your fancy and you decide it should be on the shortlist.
LOL ... I took a 45 minute VIDEO of our last PPOR pre-purchase, despite the agent's palpitations That was in a buyers market though - I probably wouldn't get away with it these days - my point at the time was I wanted to consider the whole picture in peace with my beloved, and I needed visual reminders of what I'd inspected. The real reason was I had a new video camera and hadn't had much time to play with it We still have the video - somewhere in this mess PS woohoo 600th post - sticking to my motto Quantity is better than Quality ;-) PPS WHAT ??!! I'm still just a "Member" after 600 posts - what's a bloke gotta do to get a special name ;-)
I'll let you know where to send the cheque (well done on reaching 600 - have appreciated your input to the forum community !)
Sim, you obviously haven't heard about my cheques Ah well there's plenty with more posts than me - just sticking at anything for a score of 600 is rare in my little world ;-) Cheers
