Podcast Interview: How to Inspect Like a Pro with Andrew Mackie-Smith
BuildingPro’s Andrew Mackie-Smith was recently interviewed by Brisbane buyers agent, Karen Young, for an episode of her Everyday Property Investing podcast.
They discussed what to look out for in an inspection, common issues found during Building & Pest Inspections and how you can use the reports to avoid costly mistakes or negotiate a better price.
Listen to the full interview here or read the transcript below.
Intro: Hi. It’s Kaz here from Everyday Property Investing and I’m very excited to be here with my very special guest today, Andrew Mackie-Smith from BuildingPro. How are you Andrew?
Andrew: Great Karen, how are you today?
Kaz: I’m very well thank you. You’re on here today in your capacity as an investor, but also as a building inspector and who we deal with quite a bit up here in Brisbane. So I thought we could just start by giving us some background about yourself and how you got involved in property.
Andrew: Yes sure, I was born and raised in Melbourne and I moved to Brisbane about 13 years ago. I always had an interest in property. My grandfather was a builder. Mom and Dad invested in property. So pretty early on saw them buying and investing in properties, building houses and we were always involved in building. Because that’s our family business. So when I left school, I became a building inspector and at the ripe young age of 19 I was a building inspector and I bought my first property after that at about 23.
Kaz: So you got started in the building inspection game very very early, do most people come to it in the same way that you did or are most people builders and then come into that role.
Andrew: Exactly. A lot of people have been builders first and then come to the building inspection role. I left school at 17 and then I became a cadet building surveyor and I trained as a building inspector, I studied at night school and now I have a qualification as a building inspector and building surveyor. I worked at different councils for about 8 and half years. So I worked at a number of councils including the Melbourne City Council and also the Sydney City Council and so I was doing inspections for them.
I was inspecting commercial properties, residential properties and so forth. And then I switched to the dark side and became a builder and went to work with my family building company and did that for six years and I become a commercial builder. That’s where I picked up my building experience and my qualifications.
When I moved to Brisbane, I just didn’t have contacts to get into building again and so I went back to doing what I knew initially and that was inspecting. That’s what I’ve done for the last 13 years.
Kaz: I have to say that you are one of the best ones we’ve come across, so that’s a good thing!
Andrew: Thanks Karen! That’s nice of you to say so.
Kaz: And you said you bought a property yourself at 23?
Andrew: Yeah, well I was going to buy one before that. But can you believe a friend of mine was a real estate agent, I guy I knew from school and I was even younger, I was about 19 when I looked at my first one and I got a bit burnt because he said to me “I’ve got this great unit for sale, come and have a look at it” blah blah. He told me it was $78,000. I offered $78,000 and anyway had it on contract and mom was looking through the newspaper, because I lived at home and she said “isn’t this the unit that you were looking to buy? It’s in the newspaper for $75,000”.
He ripped me off $3,000! He charged me more than the asking price in the newspaper and I don’t know who does that. I’ve never heard of that happening, I felt a bit hard done by so I pulled the pin on the contract and I didn’t buy a property for another four years. It turned me off for a little while, but then I got back into it.
Kaz: Did you speak to your friend again?
Andrew: No, I cut him adrift!
Kaz: Good idea. Who needs friends like that?
Andrew: Yeah. Who needs friends like that, so yeah, hence my lifelong love affair with real estate agents. But seriously I did buy a unit after that, in Caulfield South or South Caulfield if you prefer and that worked out to be a good investment. I put the green carpet in and painted the walls salmon pink with the texture coat as you did back in those days and thought it was fantastic. And that proved to be a good investment. But interestingly when I went to buy that, the bank said to me you’re short $12,000 dollars on the valuation. So at the last minute, I had to come up with an extra $12,000. I borrowed that from my uncle. Fortunately he came through for me and I was able to buy my first property.
Kaz: Did you have a particular strategy in mind, were you aiming to pick up things that you could improve with green carpet and salmon walls? Was that a conscious thing knowing that you had some skills?
Andrew: Yeah it was. I knew I had some skills and I could renovate. I thought what I definitely wanted to do was just a cosmetic renovation because I was busy and I like the idea of just doing painting, carpet and organising a new kitchen. That sort of thing. And I still think that appeals rather than heavy structure renovation work. So anyway that was my strategy, but I actually bought it in the company name because I thought I would do some development on the side part-time. That was my goal. But in the end that worked out to be a bit of a tax problem when I went to sell. I made a profit and I had to pay quite a bit in tax. So I learnt a bit about structuring through that exercise.
Kaz: And did you have people around you like accountants or people give you advice around that sort of thing.
Andrew: Yeah I did have an accountant at the time. I had my own “Andrew Mackie-Smith & Associates PTY LTD”. But no, I probably didn’t get the right advice at that time. I thought that I was going down the right path. They did advise me that way, I did have a discussion around that and I thought that was the way I wanted to go. But once I got married and you know, then my wife and I pulling our assets together, we decided to structure it a bit differently. Initially that was the way we did it and set it up.
Kaz: And did you go on and purchase more property beyond that?
Andrew: Yeah definitely. After that I moved to Sydney for a time and that’s where I met my lovely wife Trish. I attended a BIS Shrapnel seminar, because I believe in education and learning as much as you can about property and about property investment, so I attended this seminar and they said Brisbane is going to get a price growth of about 30 per cent. Sydney prices were pretty expensive, we were looking at about $500,000 for a unit in the eastern suburbs. So we purchased a house in Paddington, Brisbane for $295,000 at that time and that proved to be perfect timing. That was about 2002 when it was the start of a pretty major boom. So that worked out pretty well. At the same time we also purchased unit at Pyrmont and that was like an oversupply unit market. We bought right at the tail end of the boom and so consequently while we purchased a pretty cheap unit for the same value at $295,000 for a one bedroom unit at Pyrmont with just a 10 minute walk to the CBD, we didn’t get any capital growth on that for about eight years. So that just flatlined.
Kaz: So you can pick some things at a good time and some things not as good time, but if you’re holding on the long term, hopefully they all pan out.
Andrew: Yeah well that’s right. But Pyrmont, that was a very long term. You know what? For eight years it did nothing and we made a small gain. We did sell it because we want to get into some other things, but we did learn some lessons in that and a I am foreseeing a bit of oversupply in the Brisbane market with units. There’s a lot of units being built right now. A lot of cranes on the horizon, a lot of multi-storey units, and I think there’s potential for a bit of oversupply. What I experienced in Sydney, I can see that coming in Brisbane.
Kaz: I also think the same thing. We get inquiries around units and I do advise people to be careful if they wanna go for units because I do think there will be some oversupply issues too.
And you’re quite unique, it sounds like, because you lived in Melbourne, Sydney and Brisbane and owned property in all three of those areas as well.
Andrew: Yeah, I have. I suppose we’ve also purchased up here. We bought the house we’re living in, our principal place of residence at Ashgrove, which we love. Took us a while to find that. We bought a house at Springfield Lakes which we still have. That has proven to be a pretty flat investment, I’ve got to admit. It’s a nice property, nice home. When we purchased it, it was only a couple of years old and it was getting $440 week rent. We’ve earned that for about seven or eight years. It’s now only getting $450 week rent and again the reason is oversupply. Too many other houses have been built and estates opening right next to the estate that were in. So they’ve just got capacity for so many new houses coming on board there really it keeps a lid on the price growth and rents. They are only just starting to make a movement upwards and they built a train station there which has been helpful.
The prices of the properties, the rents and the yields have still flatlined quite a bit.
Kaz: It sounds like you’re also a good poster boy for diversification when you look at it. From the sounds of it, you’ve got properties in all different locations. You’ve also got houses, you’ve got units, you’ve got new, you’ve got old, you’ve got add value and you’ve got set and forgets.
Andrew: Yeah, true. We also bought some units out at Toowoomba. We bought them at the bottom of the market and so the previous owner was a real estate agent. He paid $600,000 for this small block of four units and he was desperate to get out of it. So we took them off his hands for $570,000 and using the Building & Pest (Inspections Reports), we negotiated an extra $5,000 off. And what we did was, we took that property and we just renovated the kitchens and put new carpet, paint, blinds, things like that and increased rents because the rents were quite low and then recently we just went through a subdivision. So we had to spend $5,000 doing separate water meters to the satisfaction of the Toowoomba Regional Council. We also spent about $4,000 getting the survey plan. So all up it was about $10,000 and we were able to cut that one property of four and turn that into four separate titles.
Kaz: Nice very nice.
Andrew: Yes so that has worked out well and we just recently had that revalued at quite a lot higher. So that was quite a good gain.
Kaz: Yeah that’s really good. I know there’s a lot of people out there who would love to do something like that, you always sound very sensible.
Andrew: Do I? I don’t know, with hindsight, we can always look back at our decisions and think that wasn’t a good decision. But I’ve learned through the different properties what seems to work and then also seeing the experiences of customers as well. And actually, I was working with some buyers agents who were buying some cheap townhouses on the southside of Brisbane at a place called Hillcrest, which is near Brown Plains. And bought a little one bath two bed townhouse there last year and I paid $198,500. That rents for $290 a week and I will probably get $300 a week when I re-let it in the next few months. So that’s just the real easy set and forget investment too.
Kaz: Yes gosh. You’ve picked some good winners and you sound really sensible and the things that you are doing are very sensible things to do in property. How did you learn this? How did you know what to do?
Andrew: I just I like reading and I like reading the property magazines. So I subscribed to a couple of the well known property magazines like Smart Investor in Australia and property investor mags. I read online articles and I just talk to real estate agents and clients. I’ve had the good fortune of working for some people who own a lot more property than me. Some of my clients own 30 plus properties. It’s interesting just talking to them and just asking them similar questions to what you’re asking me. How did they get started and where do they invest and why do they invest there? And just seeing what other people buy, what has worked and what hasn’t. I’ve been around as a building inspector long enough to … when I started, people were buying cheap properties out at Ipswich for $70-80,000 for houses and now those same houses are worth three or four times as much. So just seeing where other people have had success over the years has been good and also being exposed to other people’s experiences and learning from them and reading a lot. They are the two things that I’ve done.
Kaz: Do you read property books much? I just want to know if there’s a particular book that has impacted you.
Andrew: Yeah, I’ve read quite a few like that classic Jan Somers (book), I read that – How to Pay Your Mortgage off in Five Years. The Stephen McKnight one about How to Buy 35 Properties or something like that. I think to me that didn’t help me much because unless you’re prepared to set up those sort of “put and call” type options, which there’s something about that made me feel a bit uneasy. I think that’s real wheeler-dealer, that I’m not that keen on. But just reading different books, getting different ideas. Yeah I’ve read a few good ones. Chris Grey. I’ve seen him speak at a property expo that he attends each year in Brisbane and he’s written a book about his “Property Empire”, I think it’s called. He’s written a good book, I found that pretty worthwhile reading.
Kaz: I’ll have a look into that and I don’t think that is one of the one’s I have read.
Andrew: I can give you my copy. I’ve read it!
Kaz: Awesome! I will grab that off you at the next inspection. So in terms of your business, Building Pro, tell us a little bit about the business – where do you operate, what sort of inspections do you do for people?
Andrew: Yeah, sure. We do Pre-Purchase Building & Pest Inspections for people when they’re buying houses or buying commercial properties too. So we do Pre-Sale, that’s building and pest inspections for the seller. So that helps the seller to make sure their property is well presented and also that there is going to be no barrier to the sale. So they want to find out if there are any issues so they can fix them up before the property goes to market. In my view that’s an excellent thing to do if you’re a seller.
Kaz: It’s a fabulous thing to do. You know it’s funny Andrew, I’ve just purchased an auction property, pre-auction, and we said “do you have a building and pest?” and apparently the seller was not willing to pay for the building and pest. And I just think how short sighted that is because people like me will come back and try knock down your price after we’ve negotiated something because of all the things that I find on the building and pest. Whereas if you already knew what those things were and you could have addressed them, I’ve got no objections to make. So I think it’s such a smart thing to do and many people don’t do it.
Andrew: Totally. I see the benefits of it all the time. There are some real estate agents that have me do a pre-sale and they don’t have any of their deals fall over because the sellers and the buyers both know upfront what they’re getting. There’s a high acceptance rate out there in the world and it’s only a small expense. You’ve got a lot of big expenses when you’re selling anyway and paying large agents fees and advertising costs etcetera and it’s just one extra fee that’s really quite nominal. Yet it can save you a whole lot of heartache because if you get the right buyer on the hook and with the right money, you can easily lose them if there’s some significant issue that you’ve overlooked. I am really passionate about people having them. I think that it will eventually become the norm and certainly more savvy investors and sellers and real estate agents are doing that already and have been doing it for 10 years or more. But markets are slowly catching on.
Another service we do is Handover Inspections when people buy brand new properties. I do quite a lot of inspections for investors who are buying new duplexes or building new houses or things like that, so we do Handovers. So that’s like a practical completion stage, we’ll go through and write a list for the builder to rectify minor defects. They could be things like small painting defects, plaster defects, chips in stone bench tops, handles that aren’t aligned correctly. All sorts of little things and sometimes you can pick up major things too like installation missing and other things.
We do Commercial Inspections. I did one this morning on a large factory. We do Annual Pest Inspections and Swimming Pool Fence Inspections. We do a few others as well, but not as regularly as they are our core offerings and what we do.
Kaz: And what areas do you service?
Andrew: Greater Brisbane area generally. We’ll go to the Gold Coast and up to the Sunshine Coast and right out to Esk and beyond Toowoomba at times. But generally just Greater Brisbane.
Kaz: What you were mentioning before like having Handover Inspections things like that, it’s funny because people I guess when you think you’re buying something new, possibly not when you get it built yourself, but for example I bought a townhouse not that long ago and it was brand new townhouse and people think there’s not going to be anything wrong with a brand new townhouse and I think it had three pages of defects that we had on that brand new townhouse. So as you were saying, there are things that you can find that are minor. But there are bigger things too, like we tested the shower, we turned the water on and the shower rose shot out of the wall. Things hadn’t been checked off properly by someone. The dishwasher door couldn’t open because of the way it had been installed incorrectly and you couldn’t open the door. You don’t want to get left with a list of those things that you have to fix yourself. So having a handover inspection is really important.
Andrew: Yeah. I couldn’t agree more. Look honestly most times the defects will come up with a few page of issues. Sometimes it might be a handful, sometimes it could be a hundred issues. But they’re often just small defects – painting, plaster defects, minor things. But it’s all about getting that quality and that quality that you’ve paid for that you deserve. You’re paying for brand new, it should be of the required standards. So yeah I think you’re entitled to that. But on occasion, I’ve done a Handover Inspection and the quality has been so bad, like the tiles are just poorly laid, the painting is terrible, there are so many plaster defects, and there are so many other things wrong, the concreting is at the wrong levels and so forth that the buyers have actually pulled the pin. So that will happen about once a year, we’ll find a handover at such a bad job, the people won’t even buy it. So yeah sometimes there’s some bad ones.
Kaz: What are the most common issues that you come across? I guess it’s hard because for new houses it might be different to establish houses. Let’s call establish houses in Brisbane just a general category. What’s the most common issues that crop up again and again?
Andrew: Yeah, good question. Probably number one would be subsidence or building movement. A lot of people call it settlement. In other words that’s cracking, things being out of level. That’s a very common major fault and that’s something that you need to be on the lookout for. Another one in Brisbane is also if the property is flood prone. You’ll be surprised Karen. I mean you’re a Buyer’s Agent. You’re experienced, you know to check for that as a normal part of your due diligence procedure. But there’s a surprising number buyers who just go out there, see a house, do the 15 minute look through, put it under contract and I come along and do the building and pest. And I look at it and say well do you know that we’re in a flood prone part of Brisbane. Here we’re right near the river and this area got flooded in 2011 and then they say, did it? It’s amazing they live in Brisbane, but still don’t know the areas is flood prone. So checking that an area is flood prone is a common one specific to Brisbane.
Illegal building work is a really common significant fault. Just finding someone has done a lot of work either badly or without approval is a pretty common issue. On townhouses, this is just specific to townhouses, but finding that the fire separating wall between each tenancy, each townhouse, is not complete and not safe. I find that in about nine out of 10 townhouses. So that’s a very common problem as well. But a buyer wouldn’t really be able to look out for that. That’s something only the inspector can find by looking inside the roof. But again that’s a common problem.
Those things and leaks, lack of general maintenance, those kind of things. But yeah illegal building work, being flood prone, subsidence – yeah they are very common.
Kaz: We have lot of trouble, I find, with roofers. Roofs are really difficult because I think it’s something to do with the fact that you can’t seem to get a cheap repair on a roof. Often a building and pest would come up with a roof issue, some sort of roof issue, and recommend that you get a roofing person to come and look closer. And every time you get a roofing person, they tell you that you need a whole new roof. I don’t necessarily think that’s always true.
Andrew: I think that’s a good point you make and it’s like if you go to the optometrist, they’ll always going to tell you you need glasses. I think that’s sort of thing with the roof.
Kaz: What is it they say? When you’ve got a hammer, everything looks like a nail?
Andrew: I gotta say, I do think roofers are guilty of that and let’s think about it from their point of view for a moment. If you replace a roof and you’re a roofer, you might charge someone say on a small post war home that’s a typical investment property, say it’s a $10,000 job. Ok, so they might have clear $5,000 profit on that job versus if they do a repair, they might charge you $1,000 to come and find the leak and fix a piece of flashing and replace a few things. Chances are, because it has been a problem that could leak again and then they’re back out again. So think about it from their point of view. They can make a few hundred dollars profit or many thousands of dollars profit. So of course they always push for thew new roof and that’s just what they do.
Just a few tips I could give to investors who might be listening, if you’re buying in Brisbane, we’ve suffered some big hail storms here in Brisbane. I did a house just yesterday that was a big house at Hamilton and they had special domes on their roof. They had spent $60,000 putting these domes onto their roof and they were hail damaged. The lady just spent $60,000 two years ago putting these domes on and I said did you know that they are hail damage and she had no idea. Fortunately for them that’s an insurance claim, but for a lot of people you need to check if a roof has got hail damage because there are some suburbs like Moorooka, Annerley and other suburbs of Brisbane that suffered, particularly some suburbs where investors buy out at Ipswich. A lot of those roofs got badly hail damaged, so that’s something to be aware of.
Kaz: There are a few people rejoicing with that power storm I have to say. I went to see a lady, I was looking at a house, she was selling it herself, one of those owners who decide to sell on their own and it had an asbestos super six roof on it. She said don’t worry it’s all getting replaced because it was damaged in the hailstorm and I thought I bet she’s jumping for joy and there’s whole bunch of people with asbestos roofs, I am sure, up there throwing golf balls on their roof just to make it look like it.
Andrew: Well, I gotta say Karen, you don’t often hear of the super six roof being damaged by hail. It’s a very durable tough roof and they normally don’t get (damaged). We’ve had some severe hail and yes, in some areas they have been damaged, but most often they don’t. They hold up better than the corrugated steel roofs, but I have heard of a story where a guy jumps up on his corrugated asbestos roof with a hammer and ran around putting holes in it with a hammer and he claimed hail damage and they knocked him back.
Kaz: So now he’s just got a holy roof!
Andrew: And now he’s got to pay for asbestos removal and a new roof. So yeah, I’m not advocating insurance for this in the slightest, but I am saying check your roof because it can be an insurance claim. A lot of people rejoicing, as you say, out at Ipswich that had 80-year-old roofs full of rust, they were able to get a brand new roof.
But if someone is looking to buy an older property in particular, just stand back, get a vantage point and have a look at the roof from a distance. Check if it’s asbestos or check if you can see brown rusty spots on it. That’s an indication it is rusted. If you can see a silver frost paint that has been applied on the outside, that’s a fair chance that it’s rusted underneath that paint.
Just one tip, back in the old days when they did roofs they didn’t have the manufacturing processes to make the roof sheets in long lengths. So older roofs you will notice they always have a lap, one or two laps in the roof, and you see lines across. That’s where they had to lap the roof sheet, so that’s often where the rust would occur because the water gets trapped in between the laps of the sheets. Versus when you have a roof that has been replaced and it’s new, it has got no joints in it. So there’s no lap joints, it’s all one continuous sheet. So that’s the way you can tell if the roofs old or new, even if it has been painted and chances are if it is a 60, 80 or a 100-year-old house, it would probably need a new roof. So something to be aware of.
Kaz: That’s a good tip. Is there anything that you can tell us, like horror story about something you found or something weird you’ve come across in an inspection.
Andrew: Oh yeah definitely! A lot weird things. Back in the days when I was building inspector I had to issue a building permit for a Mr Ball Bearing who is the president of the Hells Angels. So he wanted a new club house.
I had to issue building permits and go and do inspection on circus tents, on the big top. I’ve found drug labs in houses. I believe there’s drug lab register. So if you have got any doubts. If you’re buying a house and it looks like squatters have lived there, you know what I’m saying – holes punch through walls and lots of empty bottles and very messy – I would particularly look into that register. I don’t know the name of it or the web address off the top of my head, but I believe that could just be googled up. But there is a register of drug labs, known drug labs, but look out for that because remediation of that can run into the tens of thousands to have all the chemicals professionally removed. Usually they have to pull the floors and walls out, as there are really toxic chemicals that they’ve use. I’ve seen hoarders, you know that show on TV where they have things stacked all the way to the ceiling.
Kaz: How do you do an inspection then?
Andrew: Well, the one I did was a unit and the guy said to me “look I know, it’s an old Russian who lives there, she’s a hoarder and I know it’s okay, but I know you won’t be able to see much, but can you inspect it anyway”. I got there and literally just could barely open the front door and from the floor to the ceiling she put everything in those white disposable shopping bags and she had clothes or stuff piled all the way, literally tight packed to the ceiling. And then she just have a little path and bags were all on her bed and all the way through every area of the house. All the way through the bathroom, the bath was full, the shower had bags in there. I don’t know how she washed and it was just remarkable experience.
But anyway, I said to the guy I’ve noticed that there are leak stains on the ceiling and then I’ve accessed and found out the roofs rusted, you’re going to need a new roof. So they didn’t buy for that reason. I couldn’t see any other walls or floors in about two thirds of the unit, but yes that was a bit interesting.
One time I did an inspection and the guys were ex SAS army guys. They had a bit of a sense of humour. They had a big two and half metre long pet carpet snake in a glass tank. I saw the snake and I said ohh that’s a big snake. They said don’t you like snakes? And I said they’re okay, I don’t mind when I can see them in the tank like that. They just thought it was pretty funny and when I got under their house, they let the snake loose under the house. That’s what they did for real, just for a joke.
Kaz: How did you go?
Andrew: I banged my head and got out quick. On one place I did, the people had swine flu. So I had wear a respirator and surgical gloves. One inspection I did, I found over $2,000 in the roof and gave that back to the seller. It was a deceased estate and his mother had hidden money in the roof with croche bags and the money had been eaten by mice and rats, chewing on all the dollar the notes. So yeah I’ve had a lot of funny things that happened over the years. Some of them aren’t too family friendly to tell.
Kaz: I will have to get those ones off you another time.
Andrew: Some of them off air, but yes some funny things.
Kaz: We’re wrapping things up because I know you’ve got to go. What sort of things can the average investor do, or look out for, in their initial inspection to save themselves from buying a lemon? Is it just being more observant? Is it looking for the big ticket items, like looking for stumps and gutters and fences.
Andrew: I have been at some inspections Karen and I’ve turned up there and before I started the inspection, I’ve said to the client do you realise that is an electrical substation over the road? And they’ve gone what? What’s that? And I’ve said, ok let me talk to you about electromagnetic radiation and so forth, but they might have an electrical sub station next to the house or over the road.
They might be in a flood prone area. One house I did was in a flood prone area and the neighbouring property was all housing commission and it was a bit run down and had some dubious looking people living there unfortunately. They were totally unaware. So I think do your research is one thing I’d say. Do your research before you even get the building inspection. Check out what’s surrounding that area, is it flood prone, are there development constraints, things like easements even.
Some people think that a driveway down the side shared with the neighbour is an easement and sometimes it’s not. After they purchase the property and the neighbour puts a fence up and they can’t access their backyard where their garage is. So don’t make assumptions. Really check out the property online, do those searches is one thing I’d suggest.
Another thing to look out for is to walk around the outside and look for signs of obvious cracks and movement. Just one tip I could give people, don’t just look for cracks, look for gaps around windows and doors. Especially if the gaps exceed about 5mm around windows and doors that can mean some pretty significance subsidence and sometimes people try to render over that. So watch out for that. The other one is look out for low ceiling heights. Especially look out for that in Queensland, that’s very common on the ground floor. The ground floor area might be illegal height. Now that’s okay as long as you know that it is just for a storeroom, but that will not be classified as habitable space. I did a house once I can remember in Bardon. It was a five bedroom house, but the four bedrooms on the ground floor were all under the legal height. So effectively, it was legally, a one million dollar, one bedroom house with four storerooms. The client buying it pulled out and the next client pulled out after that as well.
Kaz: They must have renovated that at some point and moved the bedroom downstairs because usually the bedroom is upstairs, do you think?
Andrew: Yeah. Hard to say. They’re definitely built in underneath the house. The agent was saying to me “but you must wrong because the owner is embarrassed, surely they would’ve have checked that out when they bought it”. Yeah, a lot of people don’t check things out. So I’d say walk around the house and look for subsidence and movement, do your checks about flooding and searches through your solicitors as well for illegal building works and things like that. Have a look at what’s got approval especially if the property has a lot of improvements like if it has had an extension, a swimming pool, a carport, a large double lockup garage or something added. Check that that stuff has got approval. That is really important as well.
Kaz: Yep. They are good tips. Just last question, wrapping up. Just putting your property investing or investor hat on again. Can you give us your three top tips for property investors who are just getting started with the property game.
Andrew: Yeah. I think educate yourself, research and subscribe to some good magazines and listen to podcasts. I would read websites, blogs, those sorts of things and ask questions. Talk to people who have been there, done that. A lot of people are happy to share their experiences. Talking to real estate agents when they are not busy at open for inspections, talking to people who have invested in property – that’s a great way to learn things. Take advice from people who are successful and been there and done that over a few cycles of the property rather than taxi drivers – unless of course they own a lot property! I would also suggest get your finances sorted – understanding your structuring and due diligence. So get your structure and your finance sorted before you go shopping is a good idea.
I know you buy great properties that when I go through them they are always in great condition and just have some minor maintenance. You’ve got a great eye Karen! When it comes to a lot people though, who haven’t got the experience, they’ll often think it’s a cosmetic renovation that they just need to paint and carpet. Whereas in fact the property needs extensive renovation and a lot of costly things like a new roof, or rewiring, or re-plumbing and structural repairs.
So I would say to people, best to steer clear of those properties that need that much work because as a property investor something I’ve learned and something I’ve observed, is that people don’t tend to want to pay. Let’s say you buy a property that’s a renovator and you put on a new roof and you rewire it and you replumb it, you spend $50,000 building beautiful retaining walls, when you come to sell the property, that won’t add any value to it. Not a significant value because people don’t really care that you’ve built these retaining walls. I mean a building inspector like me would be impressed, but for the general public out there they wouldn’t care. They would be much more wowed by a new kitchen or by polishing the floorboards or things like that. So if the house is structurally sound and in good condition, then you can just add value with what you do.
Kaz: Good tips. That last one is a really good one. I agree. Buy things with good bones.
Andrew: Yeah good bones.
Kaz: I was actually having this conversation with a client this morning, he wants something to renovate. But I was pointing out the difference between something that has good bones and buying something that is in really bad condition and cheap. Because of that you end up spending a lot of what I call invisible money, which is what you’re saying, you end up spending money on things that don’t bring you value as an end sale price.
Andrew: That’s a great word for it – invisible money. Replace the kitchen, you can see that. That’s really tangible and you can see that improvement to the property. If you added a deck you can see that $20,000 you’ve spent to add a deck. But you spend $20,000 improving the drainage because there’s a mold problem down stairs or you spend $20,000 waterproofing a wall down stairs – you’ve got to watch out for that. You won’t get that money back ever, so it’s really best to get a property that has good bones. So I agree.
Kaz: Thank you so much Andrew for your time. I really appreciate it and I know that we will have you back on the show at some point next year I hope.
Andrew: Thanks Karen.
Kaz: I value your time and the information you have given us today so thank you.
Andrew: It has been a pleasure Karen. Thank you for the chat, I’ve enjoyed it.
Kaz: Now our quick tip today, I thought I would relate it back to our conversation we’ve had with Andrew Mackie-Smith.
Number one tip – if you’re selling your own home or buying, get a building and pest inspection. Now I’ve been guilty of not doing this before, sometimes I’ve used it as a strategy to make my offer stronger. Sometimes that’s panned out okay, sometimes it has backfired. But I do recommend that you absolutely get a building and pest inspection. If you are selling a home, it’s just as critical, get a building and pest inspection before you put your house on the market.
Because when you go to sell, you’re going get objections from your buyers and you can help to mitigate all that risk of them trying to renegotiate or pull out of a contract down the track. If you know what issues are going to come up, you can potentially fix those before they come up. So I absolutely recommend getting a building and pest inspection before you sell and obviously also before you buy.
Now if you are going to pick a building and pest inspector, my advice on that one is to talk to potential inspection companies first. Work out who you’re comfortable with, ask them to show you a sample building report because, I tell you what, I’ve used a quite a number of building and pest inspectors in my role as a buyer’s agent and they are not all created equal, let me tell you!
We’ve definitely have a handful of good ones we use, but there have been some absolute shockers that I’ve been too as well. So ask to see a sample building report. Ask if you will be able to speak to the actual inspector – both at the inspection site and tell them that you want a debrief on site. If you get some objections to that then that’s probably a sign that it’s not the right person because being present at that building and pest inspection to me is imperative because you’ll get a report at the end. The report will be wordy and it will be a little bit “butt covering” on their behalf because they have to mitigate their own risk. So they absolutely cover all the decent information and a whole lot of sort of template guff. So you’ve really got to sift through some of these reports to get to the actual meat and potato of it. So you wanna be able to be present at the inspection because when you see things on a report sometimes they are going to look way more frightening than what they are actually are in real life. So it’s so much better if you can be on site for that.
So the tip there – get a building and pest inspection. Before you choose a building inspector, ask to see a sample report and make sure that you will be able to speak to the actual inspector themselves after the inspection and be present at the inspection wherever possible so that you can debrief with them on site and see firsthand any of the potential issues.