Buying a former rental? Here's a few tips
Over the last twenty years in the Lower Mainland, (in Surrey, Delta, Langley and all over Metro Vancouver) it's not uncommon for property owners to buy houses for the purpose of rental income.
A rental house that needs a few repairs can be a good starter home for any first-time buyer. However, it has been my experience from inspecting numerous rentals that investors rarely sell them until they have “burned ‘em out.” No matter what story the seller provides for putting the home on the market, the likely reason is that the property needs at least one major, expensive repair: new roof, water heater, or air conditioner. It may also be time for replacement of an old plumbing or electrical system that has an accumulation of handyman fixes to put off the inevitable.
Some of these problems are not readily recognizable by a homebuyer, and will be noted and evaluated later when I do the home inspection. Yet there are many simple things to look for that will tell you how well the house has been maintained. The condition of the eaves (soffit and fascia) is one of our first clues to the overall maintenance of the house. Deteriorated paint, wood rot, damaged vent screens, or loose soffit panels indicates poor upkeep.
Also, a window or sliding glass door with a stick in it indicates that it doesn’t lock or doesn’t stay open. A dish drainer in the sink usually means that the dishwasher either does not work, or does not work well. Are there buckets or pans under the sink drains to catch leaks? Are there duct-tape repairs? Stains on the ceiling that indicate roof leaks?
Often, rentals, particularly in older neighbourhoods in Surrey, Langley and Ladner are generally older and smaller houses. To get more square footage for higher rent, an investor will enclose a carport, garage, or porch. These remodeled spaces are often poorly done, with limited electrical receptacles and no vents in the roof area. Check for vents in add-on rooms and look for enough wall receptacles. Extension cords running along the baseboard are a sure sign of too few receptacles. Also, you may notice a temperature change when you enter one of these rooms, because the walls and ceilings are not insulated, (or poorly insuated). We also check for the level of the floor. It's not uncommon to have an uneven or improperly installed floor Another problem that shows up in add-ons is that there were no permits taken out for the renovation. Check out the permit history with the local municipality. Requesting a building records search does cost money. (In Surrey a records search is $19 for most building permit records) But this can be an extremely telling symptom of non-compliant work done on the home. It's probably a good idea to do this before the inspection.
A window air conditioner in a room of a home with central air conditioning indicates that the room does not get adequate air flow from the central system or the system is not working well. A dehumidifier in the corner of a room means something is wrong—there’s a water intrusion problem lurking somewhere.
Ideally, if the house is still tenant-occupied, the tenants should not be present during your viewing of the home. Ask your realtor for it to be arranged. While it may seem that they would be a good source of information, tenants usually do not want the house to change hands and may exaggerate any problems. A TV blaring while you are there, a barking dog, or rooms you can’t go into because someone is sleeping are all distractions that make your job of carefully observing the house more difficult. The tenants may also inadvertently have boxes or items in front of things we want to inspect. It's not uncommon to have a large dresser in front of an electrical panel. In one case, the tenant was so difficult about access, that the deal actually fell through.
Also, if you can, you might want to talk to the neighbors. They will be thrilled at the prospect of a rental house changing to owner-occupied, and can provide plenty of information you will never get anywhere else. Yes, you may meet a stone-faced type that is irritated at your knock on the door, but just move on to the next house and and you will find someone glad to talk with you.
Because most former rental houses are fixer-uppers, be sure to get a home inspection to protect yourself. You will know from your own investigation that the home needs work, but a home inspector will help to quantify the amount of repairs necessary and probably find at least a few additional problems to address.
Just because the house needs work doesn't mean that it can't be a wonderful place to live and raise a family. The term "sweat equity" is real. Buying a fixer-upper in a good neighbourhood (that isn't necessarily going through the tear-down and rebuild cycle) can be a great investment.