Should Investors Walk Away from a Property With Foundation Issues?


10 May Should Investors Walk Away from a Property With Foundation Issues?

Investing in real estate can be a daunting task, especially if you're unfamiliar with the particulars of a real estate market. Among the many factors to consider when choosing a new investment property, foundation issues can be one of the most troubling aspects of knowing whether to move forward with a property—or walk away. 

Although encountering foundation problems is not necessarily a dealbreaker, it's essential to know what these issues entail to avoid significant repair costs or buying a real estate investment property without realizing the extent of the foundation issues. Today we'll discuss some of the more common types of foundation problems and how they can impact the success of an investment.

Inspect Every Property From Top to Bottom

If you're thinking about buying a property with foundation issues, it's essential to do your due diligence before making any decisions. 

First, make sure to conduct a property inspection, including the roof and foundation. Check for cracks in the foundation, loose bricks or mortar, and any other signs of structural problems. 

Hands pointing to a crack in the brick wall due to a foundation problem, settling of the house

Keep in mind that inspections are crucial before closing on a new property. Be sure to ask questions when reviewing inspection reports and working with your inspector—especially if the report notes structural issues or red flags about the foundation that could make a property too expensive to repair to achieve the ROI you need. 

Whether you can physically make it to the property in another market to see it in person or not, work with a reliable inspector who delivers an honest assessment of the foundation and other critical aspects of the property. 

Seek Advice From a Structural Engineer

When learning how to get into real estate investing, seeking professional advice is vital. This is especially true for structural issues—such as foundation problems. 

A structural engineer can help assess damage or potential problems from the inspector’s report and offer recommendations on fixing the issue. The insights of the right engineer can help you find the right solution or help you determine that repair costs exceed your budget, and it’s best to walk away. 

The cost of repairing a foundation can be substantial, so it's best to address any potential problems head-on. Real estate investors often find that the costs of expert consultations are less than the cost of fixing a problem that was not previously mentioned. It's always better to be safe than sorry!

Weigh Costs vs. Potential Returns

If you are considering investing in a property with foundation problems, make sure you weigh the potential costs of repair vs. the returns you need for a successful investment. While many residential properties have foundation issues, not all are cost-prohibitive or unwise to repair for a profitable investment. 

Building addition to residential house with new foundation

Structural repairs may be necessary to keep the property operational and available for rental or sale. In many cases, it’s simply a smart idea to fix minor issues according to your budget and what the property needs. However, if the foundation problems are severe enough, it may be better to abandon the property and move on to the next options to build your real estate portfolio. 

When Is It a Dealbreaker?

So, what’s the bottom line when it comes to foundation problems that are too extensive to justify the expense? There are many reasons why a real estate investor might walk away from a property without fixing foundation issues. Some common ones include:

  • In addition to needed foundation repairs, the property requires too much additional work to justify a successful fix-and-flip project or become a rental property. 

  • The seller is not willing to negotiate the price after a home inspection reveals significant foundation issues.

  • The seller doesn't want to spend money fixing the problem before closing the deal.

  • There aren't enough resources available to fix the problem safely and cost-effectively. 

Major repairs can be costly, so if you don't see a way around it and the seller doesn't want to cooperate on fixing the issue, then you should probably move on. 

When Is It a Worthy Investment?

If you are looking for a property to invest in, and the only catch is that it has some minor foundation issues, consider ways to make it work. Many reliable contractors can take care of the repairs quickly and without any significant costs. If you’re patient and keep an open mind about potential, you may find that this property becomes one of your most valuable real estate investments.

Find Your Next Real Estate Investment Deal With Privy!

When purchasing a property with foundation issues, it is essential to do your research and consult with a professional. Many issues can be corrected without difficulty, but others may require more extensive repairs that lead to income loss.

Are you ready to start real estate investing today! Privy can help you find your first (or next) investments for rental properties or fix-and-flip homes. With our cutting-edge technology and platform evaluating your preferred real estate market, you’ll have plenty of investment property options to inspect and analyze while building your portfolio. Reach out soon to learn more about the Privy Advantage!

Learn more about  success as a real estate investor with our free ebook, "How to Invest in Real Estate: A Guide!"


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