Older properties need extensive inspections before purchase to prevent maintenance costs eating up your cash flow.
Buying an older property can be a great investment, because a high proportion of the property’s overall value is held in land and it is the land that appreciates in value over time.
However, buyers need to consider the fact that older properties have higher maintenance costs and these can chew through cash flow.
Many first time home buyers and investors tend to be attracted to lower-priced properties that may be more than 30 years old in the belief they represent a sound investment, without taking into account these higher costs.
Maintenance, however, can represent a major financial drain if the home needs significant repairs.
The general rule is the older the home, the more maintenance is required.
This is particularly the case with homes over 30 years old. Some investors who buy older homes for renovations, for example, substantially underestimate the cost of rewiring or replumbing the home.
If you are buying an older home, then you should undertake a thorough property inspection before settling on the property. Even fixing broken power points can prove expensive.
As a purchaser you are entitled to, and should take advantage of, a pre-settlement or final inspection of the property before you make the final payment and take occupation.
The ideal time to do the pre-settlement inspection is immediately before the settlement: however, this is usually not very practical so it is generally done the day before. This way, if there is a problem there is some time to sort it out before settlement. If you have some concerns that something may go missing or damage is done between the inspection and settlement, then you have no alternative than to reinspect just before settlement takes place.
When making the final inspection of the property, buyers should check that the following items are working: electric/gas hotplates, electric/gas ovens, pool pump and equipment, dishwasher, remote controls for garage doors and security gates, reticulation and water pressure in taps, and power points.
Anyone considering buying an older home should also consider employing a registered builder, who can inspect the property and provide a detailed report on the building structure.
These independent building reports not only give the home buyer peace of mind, but may also help them in the negotiation while buying the home. For example, if the building report identified problems with the roof, the home buyer could request that the price be adjusted to take into account the costs of repairing it.
In addition, home buyers should consider arranging a termite inspection report before purchasing a property. Termites can cause significant damage that is not always visible to the naked eye.
Daniel McQuillan has held senior positions in the property and financial services sector for over a decade. During that time he has gained professional qualifications and a wealth of experience that has enabled him to personally build a very successful property portfolio based on a targeted plan. In 2011, he established Investwise so he could utilise these skills to help other people create wealth through similarly devising a personal investment model that best suited their personal circumstances. As a result of this targeted and personal approach to property investment, Investwise is now one of the fastest growing property investment advisory services in Western Australia.
Further information can be found at www.investwise.net.au.