Invest to Protect Investments

AMA11-27-13Smart investing creates opportunities for building wealth over the long term, and that’s what makes investing – and real estate investing in particular — so appealing. But there’s another kind of investment that many would-be entrepreneurs miss – the smaller investments needed to protect those wealth-building assets. One of those initial investments that protect a major real estate asset is the professional property inspection.

When buying a property for investment that will depend on a steady stream of income from tenants, an investor will want that property to be in as good a shape as possible to begin with. Although expenditures for repairs and upgrades are tax-deductible and a part of doing business as a landlord/investor, a thorough inspection can spot money traps from the outset.

That’s especially true when buying properties at auction, where properties are up for sale at ridiculously low prices, usually as-is. It’s the buyer’s responsibility to have the property checked out and in those cases there’s often a grace period of up to sixty days to get an inspection and cancel the deal if things don’t turn out as advertised.

But regardless of whether the property is a smoking deal on auction or purchased some other way, real estate professionals strongly recommend an inspection performed by the pros. Although that can cost up to several hundred dollars, a professional inspection offers legal protections beyond what even the most thorough look-over by the buyer can provide. Inspectors know what to look for and their findings can be used to negotiate prices – or offer some protection against liabilities.

Home inspectors are professionals with their own organization, the American Society of Home Inspectors, and members must meet strict criteria, such as having performed a minimum number of full home inspections and evidence of training and continuing education.

These home inspectors don’t fill the same function as a municipal property inspector. It’s the job of the city housing authority to determine if a property meets the municipal standards for safety – not to provide the kind of thorough examination that catches all the potential problems. City inspectors simply sign off on relevant permits and warn owners of issues that need to be addressed.

Professional property inspectors examine the whole property, but they typically focus on a few key areas that affect the safety and functionality of the property: the roof, foundations, heating and cooling systems, wiring and plumbing. They may spot termite damage, leaks and cracks under foundations that an untrained eye won’t catch.

A professional home inspection may seem like an unnecessary expense in an already costly process. But for investors hoping to reap long-term returns as Jason Hartman recommends, a through inspection may be one of the best initial investments to make. (Top image: Flickr/ThierryL)

The American Monetary Association is the source for financial and monetary policy news you can use. Read more from our archives:

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The American Monetary Association Team

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