The “Big 5" Systems You Can’t Afford to Overlook When Buying a Rental

A real estate deal may look like a home run on paper, but you can’t know for certain until you’ve walked the property and uncovered exactly what needs to be fixed! Budgeting for renovations is one of the things that trips new investors up, which is why we’re bringing you a two-part series on estimating rehab costs. In part one, we’re taking a deep dive into the “big five”—the five major home systems that can make or break your next investment. We’re covering everything from roof to foundation, and even a bonus sixth system that’s much more costly to replace than you probably think. These are the line items that strike fear into investors due to their potentially high price tags. But rather than passing on a great deal, you’ll learn exactly what to look for when inspecting these systems, how much it costs to repair or replace them, and when to bring in an expert. Whether you’re flipping houses or making improvements to raise rents, these are the tips and tricks you need to accurately create your budget, avoid expensive surprises, and ensure you’re buying a great property—not a money pit! In This Episode We Cover The “big five” systems to check (thoroughly) when walking a property How to spot when a roof has “failed” and needs to be replaced Two telltale signs that you should replace a home’s windows The number one mistake investors make when estimating foundation repairs How much it actually costs to fully replumb your property Dangerous electrical issues that require immediate attention And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠h⁠⁠t⁠t⁠ps://www⁠.biggerpockets.com/blog/real-estate-1328. Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[email protected]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Henry Washington?

  You can analyze a property on paper, but let me tell you, I've bought over a hundred homes and these five things will make or break your next investment. Every property I buy, I check the big five. It's a simple list of the systems in a house that will cause you the most pain if you have to fix or replace them later. If all five check out, you could make thousands more over the life of a property. But if even one of these systems has a problem, it's time to ask for a serious discount or walk away. I'm going to show you which are red flags to run from, which you can fix, and how much it could cost. Also, I'll show you the hidden signs that a system is about to go, probably right after you bought the property. You can even do this if you're investing thousands of miles away.

• 0:42Henry Washington?

  I'm just trying to save you tens of thousands of dollars in this episode, but it's up to you to learn from my mistakes or make a costly one of your own.

• 0:55Henry Washington?

  What's going on everybody? I'm Henry Washington, I'm the co-host of the BiggerPockets Podcast. And in today's episode, we're doing part one of a two-part series about how to estimate rehab costs when you're purchasing a property. This is one of the most important calculations you make as an investor, and there are definitely some tricks to the trade that I've learned rehabbing more than a hundred homes myself. Today, we're talking about the big five, and that is plumbing, electrical, roofs, foundations, and HVAC. These are parts of a house that can cost the most to repair or replace. On our next episode, we'll be talking about how to fix up kitchens, bathrooms, and other value-add opportunities. So as I mentioned in the intro, the big five are the roof, the foundation, the electrical

• 1:39Henry Washington?

  systems, the plumbing systems, and the heating and cooling systems of the home. These are big-ticket items that will cost you the most to repair or replace. So you need to have a good understanding before you purchase the home of where these items are in their lifespan. What you're trying to do is to understand, is this expense coming up in the near future or in the distant future? Because the expense is coming no matter what. These things don't last forever. And if these expenses are coming up sooner than later, I want you to not be scared of the project, but be able to adjust what you're offering for the home to cover that expense

• 2:23Henry Washington?

  so that you're not covering it out of your pocket down the road. So the first item on the big five that we're going to cover is the roof. Roofs are pretty standard. There's a few different types of roofs. Mostly what you're going to find in a roof in a home in America is a shingled roof. And that shingled roof is either going to be a three-tab shingled roof, which is just the shingle looks like a brick shape and the shingles are laid in a brick pattern. They are not overlapping, they're individually laid. This is an older style. Not a lot of people install new three-tab roofs. Most people install what's called an architectural shingle.

• 3:06Henry Washington?

  That's what you're going to see most of in the United States. It is the same material as a three-tab roof. It's just structured a little differently. It's a smaller square, they're laid overlapping, creating layers, like a layering effect on the roof. And that is the standard. Most homes are going to have an architectural shingle, or when you put a new roof on the house, you're probably going to install an architectural shingle. Those are the main two styles. The third most popular style is a metal roof, and those are obviously more expensive because you're putting metal on, but they're a lot more durable. The shelf life of a metal roof is substantially longer than the shelf life of an architectural tab or a three-tab.

• 3:49Henry Washington?

  The major differences in these styles of roofs come in two parts. The first part being the cost, three-tab being the least expensive, architectural shingle in the middle, and metal roofs on the high end. But what you're paying for is lifespan. The three-tab shingle, the roof should last you anywhere between 15 to 20 years versus an architectural shingle can last you anywhere between 25 to 30 years, and a metal roof can go from 40 to 70 years. So what you're paying for is longer lifespan, better protection, before you have to make the investment to put a new roof on the property again. So how can you tell if a roof is bad?

• 4:30Henry Washington?

  When you look at these shingles, it's almost like there's a sandy asphalt gritty sandpaper texture to the shingles. And the older they are, and the more wear they have on them, that grittiness starts to wear away and it looks a little smoother. So if you're looking up at the roof and the texture of the roof seems like it's smoothed out in a lot of places, that means that that roof is probably older or has had a lot of wear and tear. Another thing I'm looking for is, is the roof line aligned? Or is it wavy? I have looked at roofs sometimes that really look like there's got a lot of waviness and up and down in there.

• 5:14Henry Washington?

  That lets me know that there's probably moisture issues and that the decking under the layer of shingles is probably warped, and that warped decking is causing the roof to look warped. And that should let you know that you need to replace that roof and replace the decking, which can be more expensive. And then the third thing I'm looking for is, can I spot missing shingles? This is the dead giveaway. You've all driven by a house, and you probably will now that I've pointed it out, and looked at roofs, and you can see shingles completely missing where it looks like there's bare spots on the roof. That's typically because of wind damage through storms that have blown shingles away, or the roof has worn down over time, and then a windstorm has blown shingles away.

• 5:59Henry Washington?

  If you've got several missing shingles, that is a clear sign that there needs to be a new roof in the very near future. And it's also a sign that when you go inside of that house, you need to start looking for spots inside the house where water may be leaking from the outside into the house because it doesn't have shingle protection on the entire coverage of the roof. So when should you look at repairing a roof versus replacing a roof? And this is, this is a tough question because it's really going to be based on what your plan is for that house. And so, when I purchase a house to flip, I do not automatically replace the roof, even if that roof is 10 to 15 years old.

• 6:44Henry Washington?

  My general theory is if the roof is roofing, we're going to let it roof. If the outside's staying outside and the inside's staying inside, it may not look pretty, but the roof is doing its job. And I'm not going to automatically replace it just because it may be an older roof. Now, if that roof is missing shingles and there's spots inside the home that might indicate water is leaking, then yes, I'm going to go ahead and replace that roof. I have clear signs that the roof is not roofing anymore. If this property is going to be a rental, which means you are going to be the one that has to replace that roof at some point, my general rule of thumb is if it looks like it needs to be replaced in the next five years, well, then I'm going to account for

• 7:27Henry Washington?

  that in my offer and get a discount on the property so that I can afford to replace the roof when I need to. I still may not replace it right away, but I know I have the budget to replace it because I offered low enough to cover that expense. In terms of what a roof is going to cost you to replace, here's how I estimate that. A three-tab roof, which I don't recommend you put on, I always recommend you do architectural or better. People see three-tab, even if it's brand new, if they have any type of home experience, they probably don't like it. So I wouldn't recommend it. But a three-tab roof will run you anywhere from five to $10,000 or $12,000, depending on the size of the roof.

• 8:09Henry Washington?

  An architectural shingle roof is going to run you anywhere from, I say on average, 10 grand, but anywhere from eight grand to $16,000, $17,000, depending on the size of the roof. Whereas a metal roof, the most expensive option, is probably going to run you anywhere from 12,000 to 25,000 or $30,000, depending on the size of the roof and the kind of metal roof that you get. All right, before we move on to the second item, I'm going to give you a number 1.5 because it is on the exterior of a home and you should evaluate it when you're evaluating the roof. And that item is windows. Windows are very expensive. And what I've learned as a house flipper over the last several years is that when you flip

• 8:51Henry Washington?

  a house, people usually expect there to be updated windows. It's funny, they may not expect the roof to be brand new, but most people want new windows. And so, eight times out of 10, I'm going to replace the windows if they're older, single pane aluminum windows. Any single pane window, I'm going to replace it. And I'm going to replace it with a dual-pane vinyl window. That is what most people expect. That is what most people see on homes. So the quick and dirty way to determine if your property needs new windows is just to go through and look at the window themselves. If the casing of the window is metal or aluminum, that's probably an older window.

• 9:36Henry Washington?

  Windows are costly. The general rule of thumb that I use is somewhere between $300 and $400 per window installed. I would estimate more on the high side, somewhere closer to $400 per window installed. And keep in mind that I'm just assuming a standard-shaped window here. All right, that covers roofs. And an extra bonus for you on windows, I can't wait to jump into foundations. But before we do that, we're going to take a quick break.

• 10:09Henry Washington?

  Here's a strategy that most W2 employees have never heard of. Normally, if you want to write off a rental property against your regular income, you need real estate professional status. That means tracking hundreds of hours a year. Rent to Retirement just launched a program that skips all of that. It's called the STR loophole tenant placement program. Here's how it works. You buy one of Rent to Retirement's Class A new construction investment properties. You set up an Airbnb listing and self-manage it for the remainder of the year. Rent to Retirement then rents the home as a short-term rental to establish it as an STR for the year. No furnishing required, making this the easy button to save five or six figures in taxes this year. And because you're the sole manager, there's no hourly minimum to meet.

• 10:55Henry Washington?

  That lets you use a cost segregation study to accelerate the depreciation and potentially write off over $100,000 against your income, even on your first rental. Add in cash back up to 13% of the home price, which exceeds $60,000 on some properties. With this massive cash back incentive, investors are seeing total returns up to 126%. New construction, A-class properties, and inventory is limited. Learn more at biggerpockets.com/retirement or text REI to 33777. Again, text REI to 33777.

• 11:32Dave Meyer?

  Summer bookings sound great until someone slips by the pool, gets hurt on your dock, or damages your property during a long holiday weekend. A lot of short-term rental investors don't realize their standard policy may leave gaps when it comes to short-term rental activity. That's why investors use Steadily. They offer landlord insurance built for real estate investors, including short-term rentals. And if you're a BiggerPockets Pro member, you'll also get 5% off your landlord insurance premiums. Visit biggerpockets.com/landlordinsurance to learn more.

• 12:05Henry Washington?

  Quick word about a new pro perk you'll want to know about. Aven, if you're a homeowner, there's a good chance you're sitting on equity that you're not using. The problem is tapping into that usually means a cash-out refi, a traditional second mortgage, or weeks of paperwork just to get approved. Aven built something different. It's a credit card, but it's backed by your home equity. So you get a lot of the rate benefits of a HELOC with the flexibility of a card you can use anywhere. Rates are typically well below a standard credit card. Approval is fast and mostly online, and you can use it for anything. A renovation, paying down high-interest debt, or just have more breathing room in your budget. And if you're a BiggerPockets Pro member, there's an extra reason to check it out. Get approved for the Aven card and you'll get a $400 statement credit after spending $400 on your Aven card.

• 12:51Henry Washington?

  Enough to cover your entire annual pro membership. Head over to aven.com/biggerpockets to see if you qualify. Aven Financial, NMLS #2042345. Cards issued per 202 license from Visa USA, Inc. by Coastal Community Bank. NMLS #462289. Member FDIC, equal housing lender, subject to approval, terms apply. Visit aven.com for details.

• 13:10Speaker 02

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• 13:41Henry Washington?

  All right, we are back on the BiggerPockets Podcast and we are discussing how to evaluate the big five. These are the big-ticket items that you need to make sure that you are budgeting for when making offers or purchasing new properties. We covered roofs in the first section and we covered windows. And now we're going to talk about the dreaded foundations. There is a lot of stigma around buying houses with foundation problems. And trust me, it is well-earned. Foundation problems can be a nightmare and they can be crazy expensive. By far, the most expensive item within the big five. So it is not something to be taken lightly.

• 14:25Henry Washington?

  But do remember that it's just a number. It's just a dollar amount typically to fix the problem. There are some foundations that are beyond repair and that essentially renders the house to tear down. But for the most part, there's work that can be done to repair, stabilize, or even replace a foundation. So how do you know if there's foundation problems? That's your first job as an investor, is to walk the house and try to determine, is there even a foundation problem? And so here are some of the things that I look for or that I'm on the lookout for when I'm walking a house and I'm trying to evaluate if there's a foundation issue.

• 15:07Henry Washington?

  And first and foremost is what do you feel under your feet? Does it feel like you're walking up an incline when you're just in a flat room? Does it feel like you're walking down a hill when you're in a flat room? Does it feel like you're going over bumps in the flooring? Bumps in the flooring may be just because of the flooring, but it could be a sign that there's foundation issues. But if the house is sloping up or down, that is a big red flag to help you understand that you've got some foundation problems that you need to have evaluated. The next thing I'm looking for is are there large cracks in the wall? Drywall is drywall. It's going to crack because houses move.

• 15:53Henry Washington?

  Houses are just like anything else. They expand and they contract. When it's hot, it expands. When it cools, it contracts. And that can cause some cracks in drywall, but typically those are small cracks. Foundation cracks, however, tend to be much bigger. Think of something that you can fit your finger into. If you have large cracks that you can put a finger in, maybe a big coin can go in there. Now we're talking about something that's caused by more than just your normal house breathing, expanding and contracting. All right, that's a sign that the foundation of the home is shifting, causing that drywall to crack substantially. So you're looking for the thickness of the crack. You're also looking for the length of the crack.

• 16:36Henry Washington?

  If it is a long crack spanning from the floor to the ceiling and across the ceiling to the other wall, that's a massive crack. That doesn't just happen from expanding or contracting. That is actual house slippage or movement that's causing such a big, long crack. So if you're seeing wide cracks or long cracks, that's something to make a mental note of, that you want to get a foundation specialist in there to take a look at that property. The next thing I'm looking for is if I see some of the signs of cracks or I see some of the signs of flooring being sloped, the next thing I'm doing is I'm opening and closing all the doors. Because if the house is unlevel and it has shifted,

• 17:20Henry Washington?

  sometimes the doors won't open all the way because maybe the floor is lifted up a little bit and the door doesn't have the clearance it would normally have. So if you're opening doors and they're sticking to the floor and you're having to pull on them and then drag them across the floor to get them to open, that could be a sign that there's a foundation issue. Same thing if they're sticking in the door frame, meaning that the frame of the house has maybe tilted or adjusted because the foundation is off, but the door hasn't shifted with it, then it can get jammed inside of the door frame. And it seems like, seemed like maybe the door is just sticky. It may not just be sticky. It may be that it's not fitting properly and the foundation's causing it not to fit. So I open and close all the doors to see how smoothly it opens and closes.

• 18:05Henry Washington?

  Is it dragging on the floor? Is it sticking in the frame? And then the next thing, I wish I didn't tell you to look out for this, but I've seen it with my own two wives in more than one house, is when you're opening and closing those doors, check the tops and the bottoms of the doors. I have literally seen where people have sawed off the top of the door because the foundation problems were so bad, they couldn't get the doors to open and close. So they self-modified the doors. So just check the doors and make sure they haven't been handyman-speciald and the owners of the property haven't cut off the tops or bottoms of the doors to make it seem like the foundation isn't a problem. So these are enough visual cues for you to be able to have a good idea if there's foundation issues.

• 18:51Henry Washington?

  And so now I want to talk about how do you assess how much it's going to cost you? And here's my secret to assessing foundation issues. Secret number one is I don't.

• 19:03Henry Washington?

  Foundations are hard to estimate. I have tried and I have failed almost every time. When I thought it's only going to cost me $5,000 to fix a foundation, it's cost me $25,000. And when I thought it was going to cost me $25,000, it's cost me $5,000. I do not estimate this anymore. It is not my area of expertise. I don't understand it like an expert does. So when I'm walking a property to evaluate if it has foundation issues, I am going to bring in a foundation specialist. So really what you're looking for is, am I seeing cues of foundation problems? If I am, great. Let me bring in a foundation specialist to evaluate that property and give me a quote to fix that property. That is what you should trust.

• 19:46Henry Washington?

  Do not try to estimate this on your own unless you're a contractor with experience in working with foundations. And two, get more than one quote. The work involved with fixing foundations can be very specialized. Some people have better tools and skillsets than others. And so I've had multiple bids where I've gotten a bid for $15,000 to fix a foundation. And then I've gotten a bid from another contractor for twice as much. So get multiple bids for the foundation repairs and then ask each contractor to explain the bid to you. A, so you are learning what's happening and learning how they're fixing the problem. And so B, so that you can get better at understanding what's involved with fixing foundations,

• 20:29Henry Washington?

  so that you can be more educated on the next property that you see. But I can not stress enough, don't estimate yourself. Get a professional to estimate it. Get multiple bids. Ask lots of questions. The next big ticket item, in my opinion, is one of the hardest ones to evaluate, to be able to tell if you need to replace this and what it's going to cost. Mostly because it's plumbing and all the plumbing lines are buried. So you can't see them with the naked eye. But if you look past this item and it comes back to bite you in the butt later, it can cost you thousands to tens of thousands of dollars,

• 21:09Henry Washington?

  depending on the age of the home and depending on the kind of plumbing that was used for that property. So here's what to look for when you're walking a property and trying to make sure that there aren't major plumbing issues. When you're inside of the house, turn on the water. See what color the water is. Is it gross? Is it brown? If it's gross and brown, that means there's probably some sort of rust or sediment inside of the pipes that's causing the water to change colors. And trust me, that's going to show up on an inspection. People are going to notice, they're not going to want to buy the house. So you're going to want to make sure that you're budgeting to get that repaired or replaced. Check the water pressure.

• 21:52Henry Washington?

  If the water pressure seems super low and you've gone to the hot water heater and checked on the pressure and it looks like it should be higher than that, then that is a sign that there's something either blocking the water from coming through the pipes. And typically that's some sort of like corrosion or some sort of mineral buildup. So if you've got old copper and cast iron pipes over time, just from daily use from years and years, there's just corrosion and things that start to build up and shrink the thickness of that pipe. And so the water stream that's coming through those pipes is so constricted that the pressure is no bueno. So check the water pressure when you turn the faucet on.

• 22:38Henry Washington?

  The next thing you're looking for, look under the sinks. When you're looking under the sinks, what you're hoping to see is PVC. And that's the white plastic pipes. That's newer plumbing connections. And that PVC is what's on the inside of the house. But that PVC connects to the actual plumbing of the house that's underground. And so you can start to see where the plumbing from under the ground comes up into the sink area and then where the plumbing that's in the house connects to that. So if you're checking that and you see all PVC and it looks clean and clear, that's a good sign that plumbing's been updated. If you're looking at that and you can see that the plumbing coming from the under the

• 23:18Henry Washington?

  ground into the home looks like an older galvanized pipe, but the PVC connecting to it isn't, that's a sign that the plumbing inside the home's been replaced, but the plumbing under the home may be very old. So check on that. I always look for those things. And then under the sinks, I'm also looking for, does it stink under the sink? If it stinks under the sink, that could be a sign that there's leaking coming from the plumbing. It could also be a sign that that old plumbing pipe coming into the house is just old and gross and corroded with junk that's been put down the drain for years. I'm also looking at the decking under the sink. Are the boards wet? If they're not wet and they're dry, are they wavy? Are they showing signs that they have been wet before?

• 24:03Henry Washington?

  Cause then I'm going to ask the question, was there a leak that was fixed? Is it just an old dried up leak? But you're starting, you're looking for signs that water was leaking from pipes and sitting on that, on that decking boards under the sink. And then I'm also looking for signs of mildew or mold. If there's mildew or mold, that's a clear sign that there's an active leak or there is water pooling somewhere. Mold or mildew doesn't live without moisture. And if there's moisture, then you probably have yourself a leak. So I'm looking for signs of water under the sinks. I'm also looking for drains. So when you are testing the water pressure, close the drain so that the sink fills up and then open the drain and see if it drains

• 24:47Henry Washington?

  in a normal time span. If it's a slow drain and it's just sitting there and nothing's draining like as fast as you think it is, that could be a sign that you've got some buildup or something going on inside of the pipes, a sign you need to replace that plumbing. You don't just need to check inside the house for plumbing issues. You also need to check outside of the home for plumbing issues. This is a whole lot harder to spot. The more you look at this, the better your eye is going to get. I'm still not great at this. These are things that are hard to see. But what you're looking for when you're outside of the home is you're feeling around for wet spots. So if you're walking around the outside of the home and it's not raining outside and you walk through a spot that seems damp or like it's been recently watered,

• 25:31Henry Washington?

  that could be a sign that there's a pipe under the ground there that has a leak and it's saturating the ground. Another way to tell that there might be a leaking pipe outside of the house is, is the grass super green in like one patch in the backyard, right? Maybe it's greener than everywhere else, or maybe the grass is all dry, but there's a green spot. That's a sign that there may be water coming from a pipe under the ground there and that that spot is getting saturated and is doing well from a fertilizer standpoint, but probably not doing well from a plumbing standpoint. And then other things like sink holes, if there's a spot in the backyard or in the front yard that seems like it's, it's dropped down, like it's sunken down a little bit, that could be a sign that there's a pipe causing a problem, maybe a pipe with a crack in it,

• 26:17Henry Washington?

  or something saturating the ground, causing the ground to sink. And then the last thing is look for cracks in the foundation or pooling water around the edges of the home. I recently had this at a property that I was selling and we had a hose bib that was on the side of the house and the hose bib, part of the hose bib that was under the house was leaking. And so we had really damp ground in one section in one corner of the house by the foundation. That was a clear sign to the inspector that there was a problem with the plumbing. Sure enough, we get a plumber out there and the hose bib was leaking. So if you're walking a property and you start to notice one, two, three, or several of these things that are going on with the property, what does that mean in terms of cost?

• 27:02Henry Washington?

  Well, I've got good news with plumbing is that it's typically a capped cost. There's not, it's not like foundations where it could go up to $50,000 to fix a foundation. This is plumbing. It's to replumb an entire house, a standard three bed, two bath, 1500 square foot house, you're probably looking at anywhere between seven grand to $15,000. Now, there's probably some variations on the higher side and there may be some variations on the lower side, but you're pretty much capped somewhere in that ballpark. So it's not the end of the world if you have to replumb a house. You just want to be able to budget for it on the front side. It's same thing as like if you were budgeting for a roof of the same cost. And so what I would recommend is if you start to see some of these issues,

• 27:45Henry Washington?

  just get a plumber out there and have them give you an evaluation of what's going on and what they could do to potentially fix the problem. And then have them give you a quote to completely replumb the house as well. And then make the best choice for your budget and the deal that you're working on.

• 28:01Dave Meyer?

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• 29:58Henry Washington?

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• 30:55Dave Meyer?

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• 32:53Henry Washington?

  All right, we are back on the BiggerPockets Podcast, talking about the big five. Plumbing, roof, foundation, electrical, and HVAC. How to evaluate a home to see if one of the big five have an issue, what it's going to cost you to fix it, and what you should do about it. All right, next on the list of the big five is the electrical systems. This one, in my opinion, is a little easier to look for because there are lots of signs that you can look for in the house to let you know if you've got to work on the electrical, have it repaired, or have it replaced. So when evaluating the electrical system, the first thing I'm looking for in the house is the electrical panel. I need to locate

• 33:35Henry Washington?

  the panel. I want to open the panel, and then I want to see what it looks like on the inside. What I am looking for is I'm hoping to find a breaker panel. Breakers are the modern electrical systems that newer homes uses. And so if you open it and you see breaker switches, that is a good sign that you've got some updated electrical. You probably won't have to do much of any work as long as the service or the amp service coming into the house is high enough to support what you want to do in that house. But if you open that panel up and you see fuses, they look like little light bulbs that are screwed in backwards. You pull them out and you can see old fuses. That is a

• 34:18Henry Washington?

  sign that that is an older electrical system in that home and that that may need to be updated. So if I am flipping a house and it has a fuse panel, I would say 80% of the time, I'm probably going to replace that fuse panel with a new updated breaker box because people are usually expecting that. Some other signs, if you can't locate the electrical panel, or you just aren't quite sure what's going on, some other things to look for or to go around and look at the actual outlets in the home. Are they three-prong outlets? If they're three-pronged outlets, it's very likely that the electrical system has been updated at some point. Now, they can be three-pronged outlets, and a lot of

• 35:00Henry Washington?

  the times, if they haven't been updated, that third prong may just be a dummy. And so just because it has three prongs doesn't mean that it's been updated, but it is a sign that it might have been. But if you are seeing all two-pronged outlets, that's a sign that it's got older electrical and that you may need to update it. Doesn't mean you have to, just means it's older and it might be causing a problem. Other things you can look for are if you're turning on and off light switches, are the lights flickering? Does it look like there's struggle to have lights on? Is there struggle to carry load, electrical load in that house? Also, touch the electrical switches. Touch the outside

• 35:42Henry Washington?

  of the outlet switches. Are they warm? If they're warm to the touch, that could be a sign that something is wrong, that they may need to be just an outlet rewired, or maybe that whole home needs to be rewired. There are some more advanced things you can look for. I am not an electrician, so I don't try to look for these things, but some of you may have experience with electrical work, or maybe you have family members that do. And so one of the things you can look for when you're looking into a fuse box or electrical panel, you want to look for double-tapped wires. So these are where multiple wires are tapped into a single circuit breaker. Not always easy to identify if you don't have a trained eye, but most people who have seen what a single tap looks like would

• 36:23Henry Washington?

  be able to identify a double tap super quickly. Also, look for rust or corrosion inside of the service panel. That could be a sign that there's something going on with the wiring, maybe that it's not wired correctly, or that there's some sort of problem causing corrosion or buildup. All right, so if you're walking to home and you're seeing some of these red flags, potential electrical issues, do not fret. This isn't another one of those situations that's going to put you in the poorhouse completely, but it can get up there. A typical rewire on a home, if you've got to redo it all, can range anywhere from four grand to about $15,000. That's generally what it costs in my neck of the woods. If you live in a more expensive market, it could cost more. If you live somewhere in the Midwest,

• 37:07Henry Washington?

  maybe it could cost less. But have an electrician come out and give you a quote for what needs to be done. Very similar to plumbing, there is things that can be done to modify or fix a situation rather than to completely rewire. But remember that electrical, unlike plumbing, can be very life, health, or safety-related. You don't want to have a fire hazard and risk a fire because you're trying to save a few hundred dollars. So make sure that you get bids to fix whatever the problems are, that you ask your electrician, what are the risks if I don't completely replace it versus just doing this fix? Oftentimes,

• 37:48Henry Washington?

  I err on the side of just replacing the electrical when it makes sense because it's life, health, and safety. But make sure you get a licensed electrician in there to evaluate the problems that you've seen, to let you know if they're truly a problem or not, and to let you know if you can fix it and if that fix will be safe. Last on our list is the HVAC system. This is the heating and cooling system of a home. It can be expensive to repair and to replace, so you want to evaluate it when you're walking the home. Here's what I look for. There are typically two main elements you want to look for in your HVAC system. That is your condenser unit, which is usually located outside, and

• 38:32Henry Washington?

  your furnace, which is usually located inside of the home. Now, depending on the area of the country, will determine where on the outside of the home the condenser is. In my neck of the woods, they're typically just outside, ground level, on the backyard of the home in most cases, or on the side of the home in most cases. But if you're on the West Coast, like Arizona or California, oftentimes, these things are placed on the roof. So you might have to get up on the roof, or send somebody up on that roof to look at that unit to determine what kind of shape it's in. You'll know an old, bust-down looking one when you see one, and you'll know a one that's in pretty good shape. So what I like to do is I go to the outside unit and I take a picture. There's usually

• 39:16Henry Washington?

  an information sheet or panel on that unit, and I can upload that to AI and ask it to tell me how old the unit is. And that can help you understand where in its shelf life that unit is. That's pretty much it, guys. I'm just eyeballing that thing. If it looks old, then I'm probably going to be like, yeah, I got to replace this sometime in the next five years. If it looks new, I'm thinking, ah, it's probably fine. It's more of an art than a science. Just being honest with you about what I look at. Next, I'll go to the inside unit. Typically, it's in a closet somewhere. Very rarely, it's in the attic, but sometimes it is in the attic. But I'm looking at the furnace, the inside unit, and I'm doing the same thing. Does it look old and gross? Does it look functional or not functional? Turn it on, turn it off, see if it kicks on or kicks

• 40:00Henry Washington?

  off like it's supposed to. These are just very basic things that you can do to determine if that unit is working properly. You're also going to come across properties that have or should have central heat and air that don't. Maybe they took it out because it wasn't working and they couldn't replace it. Maybe it stopped working years ago and it's just never been working. So some things to consider because they can change the price drastically. When you're looking at a home to evaluate the heating and cooling system, the first thing I want to know is, does it currently have ductwork? Does it have a working heating and air system, or has it had a working heating and air system before? If it has, there's

• 40:44Henry Washington?

  typically going to be ductwork, meaning there's going to be air ducts either under the house, if it's a crawl space, or up in the attic, if it's on a concrete foundation, and you can see the vents, and there should be a vent in each room. That lets me know that it's either had heating and cooling before, or it has heating and cooling. Because if it has ductwork and you have to replace the HVAC system, your cost to replace that system is reduced substantially because you don't have to run new ductwork, which gets very expensive. If you are in a house that has never had central heating and air before, And you're in an area of the country where people need and expect central heat

• 41:24Henry Washington?

  in there, then you need to plan on installing it and that price can be far more substantial. So here is what it typically costs, or what I typically budget for heating and cooling. If I am installing an HVAC system in a home that's had HVAC before, so I'm either replacing a current system, or the system's been removed, but the ductwork is still there and I'm putting in a new system, it's typically going to cost me anywhere between seven and $10,000. It used to cost around five, but costs have gone up substantially. So seven to 10 grand, new HVAC system, pretty standard for this part of the country.

• 42:05Henry Washington?

  Now, if that house has never had HVAC before, and you have to run new ductwork, then you need to get a professional licensed HVAC company out there to give you a quote because the ductwork will be expensive and you don't know how much ductwork you need for that house because you're not quite sure where that ductwork can even go. If it's a concrete foundation, it's probably got to go up in the attic somewhere. Do you have enough space in the attic for all this stuff? If it's a crawl space house, maybe it can go under the house. Do you have enough space under the house? So don't try to estimate if you've got to do an entire new system. There's a ballpark range you can be at.

• 42:45Henry Washington?

  I've had to do it a few times, but it's typically run me anywhere from $15,000 to 20 or $25,000, depending on what kind of unit I want to put in and what kind of lifespan I want that unit to have and how I want that unit to operate. Is it going to be a gas unit? Is it going to be electrical unit? Right? There's lots of variables. So please get multiple bids if it is a house that has never had HVAC before, because the cost can go up and there are tons of different options for your system. You need to pick the best option for the house that you're putting heating and cooling in and for your budget and the deal you're trying to do. All right, folks, there you have it. That is the big five.

• 43:27Henry Washington?

  We covered plumbing, electrical, HVAC, foundations and roofs. We covered what it's going to cost you to replace or repair any of these issues and specifically what to look for when evaluating these things. Remember to keep in mind that every problem you find can typically be remedied with some sort of dollar amount, so you don't have to run away from a deal. If these red flags start to pop up, but you darn sure better be prepared to make the appropriate offer. If you need to come off of that price to cover some of the expenses, please do so, or you could find yourself in a world of hurt, having to come out of your pocket to fix these big ticket items.

• 44:09Henry Washington?

  If you've watched this and you're still a little unsure about what to do, you can always pay for a home inspection. Home inspectors will look at all five of these areas as part of their inspection and give you an analysis and whether they think you need to bring in a specialist, or if it needs to be repaired or replaced, that is part of what you get when you do a home inspection. And I am not saying that me teaching you how to look at these things should be a reason for you not to pay for a home inspection. If you are not confident estimating rehab costs or determining what it's going to cost you to repair or replace any of these things, get the home inspection anyway. Spending a few hundred dollars could save you tens of thousands down the road.

• 44:52Henry Washington?

  All right, folks, so that's the big five item list that you need to evaluate when you're planning your next repair budget on a new property. But these aren't the only renovations you need to make. So on our next episode, we're talking about the classic value add opportunities, updated kitchens and bathrooms, floors, moving walls and more. I'll talk about all of that on our very next episode in just a couple of days. Thank you so much for listening to this episode of the BiggerPockets Podcast. We'll see you in part two.

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