The different types of building inspections that property investors must know

Andrew explains the different types of building inspections and how it could contribute to the success of an investor seeking to create wealth through property:

Aside from its usual purpose, what else should property investors know about standard building inspections?

Andrew Mackie-Smith: In a standard building inspection, the inspector would not be expected to survey property boundaries to understand where the boundaries in fact are. But through a duty of care, if they notice something, they should be passing that onto you. That's [the] value-add of [getting] an experienced inspector.

Should investors get a separate electrical inspection for their property?

Andrew Mackie-Smith: If you're buying a property [that is] more than about 30 years old, do get an electrical inspection. It's worth it. I've seen these buyer's agents I work with regularly, and they will always insist on having an electrician be there at the same time as the building inspection.

Old properties often have “more surprising” issues, based on the builder’s experiences of inspecting houses and buildings for over 15 years. Often there'll be older properties that have air conditioning installed but didn't upgrade the mains so the mains are actually insufficient or they don't have adequate circuit breakers... Open that switchboard up, have a look in there if you've got the old ceramic fuse types switchboard—you're up for about $4,000 at least for new switchboards straight away, so check for that.

If you see the old-fashioned fabric type covering on the wiring, that's got to be instantly replaced. That's very suspect. There is also some cheap Chinese wiring… that's being deemed unsafe as well.

What other types of property inspections are there?

Andrew Mackie-Smith: There's clearly swimming pool inspections. If you've got a pool more than 30 years old, even more than 20 years old, if the pool equipment is original, chances are it needs to be replaced. And you often need to have swimming pool fencing compliant with AS1926, so you'll need a swimming pool fence inspection, at least.

There's also you might need a structural engineer to do an inspection if there's cracking found that's significant, just to determine there's [no] major structural cracking.

You could also perhaps need to get a dilapidation inspection done. If, for example, your neighbour is going to do a major development, they're going to excavate or dig out a big hole right next to your property and close to your building, this could undermine the footings on your property, [and] could cause cracking and movement. If there's any road works or significant building work next to your property, I would strongly suggest you get a dilapidation report—that checks your building for cracks, puts a photographic record to it, and if anything comes up in the future, you've got that there [as] proof.

A lot of major developers and road government authorities who build roads will actually commission those reports.

Are there any possible consequences in foregoing these inspections?

Andrew Mackie-Smith: I had a client that is aware of border property, I did the inspection—the retaining walls were fine, they were boulder-type retaining walls, and they were actually higher than the house. They would have been about eight metres high. Some time after he purchased the property, there was road work [done], there was vibration from the road work, and it caused those retaining walls to move, the boulder walls to move.

He consequently tried to claim it on the road engineers [but he] wasn't able to successfully make a claim. So he [got] out [his] pocket $70,000 to fix up his walls. Having some sort of dilapidation report if there's any work done would have been helpful for him. He had my report, but that was more to do with the building and not these boulder walls.

What is the purpose of an asbestos report?

Andrew Mackie-Smith: An asbestos report is a great idea if you suspect asbestos in the property. A standard building report does not actually include common omnipresence or absence of asbestos, and in fact, in the inspection agreement you'll sign with the inspector, most cases it will be specifically excluded. This is for liability reasons. But if you're advised by your inspector to obtain an asbestos inspection report or order, I strongly recommend you do. It costs generally for a standard sized house, say, 3 bed 1 bath, maybe about $550 dollars.

It will identify [the] location and the type of asbestos in the property. Friable loose-type asbestos, if it was insulation, is quite dangerous and hazardous. If the asbestos is bound up into the shape, the experts advise that that is generally considered reasonably safe, provided you're not cutting it, drilling it, [or] sanding it back… My advice to people is if you suspect asbestos, do have an audit done. That's worth the money.

Be very careful about buying a house that's constructed with asbestos ceiling and walls if the paint is peeling, because many painters will not be able to scrape that back and sand it back, they will actually have to remove the shades… It's $40 a square metre to have it professionally removed and the cost can add up very quickly.

Personally, do you think getting all these building inspections are worth the extra expense?

Andrew Mackie-Smith: I do think that people need a building inspection essentially to avoid future significant unexpected costs. Because [those costs] can really kill the investment. You buy property to make money out of it, not [to make it] a money pit… You need to know what you're buying.

Any final advice for prospective property buyers?

Andrew Mackie-Smith: [Don’t just] read the report and just assume that they've absorbed everything from the report.... I've written reports myself and I've also read plenty of other reports—it's difficult to ascertain the property because there's a lot of information in those reports and there's a lot of disclaimers often, too, so they can be confusing.

Speak to the inspector. Make sure you make the time to have a chat and understand it… [because] getting the inspection done is only half the service. Make sure you a) Read it. Actually read the report, and b) Speak to the inspector to clarify any points from that. I think that's really key.

Tune in to Andrew Mackie-Smith’s episode on The Smart Property Investment Show to know more about the science behind pest and building inspections, as well as the top 10 things every investor should check to ensure their new property is the real deal.