Visiting a property that is open for inspection is about much more than just seeing what it looks like. Here’s what you need to know before you explore open homes to ensure you buy a safe and secure investment property.
What do you want from your investment?
Open-for-inspections, or open homes, are an essential part of the real estate process in Australia. They’re your first opportunity to match reality to a real estate agent’s copy and find out whether a property is right for you.
The trouble with some investors, particularly early on in their portfolios, is that they tend to approach open-for-inspections from an owner-occupier’s perspective. They look at a prospective investment as though they are going to live in it, and ask emotive questions based around this.
That’s not the right approach if you want to ensure you spend your precious time and money on a property that will perform to your investment expectations.
So the first and most important thing to know when inspecting a potential investment is what you want from it.
What kind of yield do you want? Are you prepared or equipped to conduct renovation work? What kind of tenants do you want? Will you want to subdivide or construct additional dwellings in the future?
Your answers to these questions will dictate exactly what you look for in a property, but the guide below should provide you with a basic outline of what to keep an eye out for at open-for-inspections.
Some things might seem minor at the outset, but small costs add up quickly, and the name of the game with property investment is maximising earnings and minimising costs.
What to look out for inside a property at open-for-inspections:
- Water stains on the shower/bath walls: while not a structural defect, these look terrible and are costly to rectify.
- Sagging ceilings: both expensive to fix and potentially dangerous.
- Damp in kitchen and bathroom cupboards: open the cupboards and take note of any smells inside. Is the cupboard trim warped? This could be a sign of a water leak or a damp/ventilation issue in the building.
- Cracks in the wall: can indicate structural defects.
- Water pressure: turn on the taps to check the pressure and take note of the water colour to gauge its quality. See how quickly the water drains – slow drainage may indicate that you’ll need to do significant plumbing work.
- Sticking windows: this can be a sign of rusting or warped window frames, which may require replacement.
- Leaking toilets.
- Hot water unit: how old is it? Has it been serviced? How long does it take to heat water?
- Light switches: it might sound simple, but the age of a light switch can provide a good indication of the state of electrical wiring in the building. Older switches may indicate the wiring is in need of replacement.
- Variations in paint: this is a tell-tale sign of paint being used to cover up an issue such as damage from damp.
- Insulation: if you can, inspect the roof cavity to gauge the state of insulation in the property. Ask the agent if the property is fully insulated.
- Pests such as cockroaches: getting a property fumigated can be a significant expense.
- Power points, TV antenna points, internet connections: the location and number of these features can make a big difference to tenant appeal.
- Floor coverings: have the carpets been well looked after? Replacing carpet is an expensive job, but may be required to enable the property to appeal to tenants.
- Window furnishings and fly screens: are they in good condition?
- Kitchen appliances: are the oven, stove top and dishwasher modern and in good condition?
- Air conditioning and heating: do these systems work efficiently? Have they been serviced?
- Floorplan: is the floorplan logical and convenient? Unusual floorplans can severely limit your tenant pool and rental price.
What to look for outside a property at open-for-inspections:
- Building and block orientation: this has significant ramifications for how hot and cold the house will be.
- Pipes and gutters: check the external plumbing for signs of leaks and rust.
- Fuse box: is it safe to access and in good condition?
- Roof: are the tiles intact? Is the roof sagging at all?
- Asbestos: is there any documented history of asbestos being used in the construction? If the property was constructed or renovated before 1990 there’s a chance that asbestos may be found in some of the building materials.
- Outbuildings: are they properly constructed? Ask to see permits for any outbuildings.
- Termites: termite activity will be picked up on a building and pest inspection, but it pays to keep an eye out for obvious termite damage, particularly to wooden components of the house that make contact with the ground (such as verandah beams).
- Trees and plants on the block: are the trees in good health or rotting? Rotting trees will need to be removed. Are any trees located close to the property? They may present a risk to the property and drive up insurance premiums.
- Fences: are the fences upright and in good condition?
- Garden: is the garden well-maintained or landscaped?
- Drainage: are there any patches of soggy lawn or wet pavement? These can be signs of poor drainage, which may present a flood risk.
What else to look out for at open homes
There are some things that can’t be checked by a physical inspection. These include whether there are existing planning permits in place, results of any soil contamination reports, and land boundaries.
Most of these can be obtained from the real estate agent marketing the property, but you should also conduct a title search and consult local council documents to find out as much as you can about the building.
Things to ask about/investigate include:
- Council rates
- Land tax rates
- Existing planning permits
- Property zoning
- Flood and fire risk
- Soil and groundwater contamination
- Utilities provision (is there a gas line to the property; separate water meter?)
- Owners’ corp fees
What to do after an open-for-inspection
If you haven’t identified any major issues with the property and it aligns with your investment goals, you will need to engage professionals such as a building inspector and valuer to inspect the property more rigorously and uncover any hidden issues.
You may also consider engaging a legal professional to investigate the building’s documentation.