Luckily for me, one of the biggest mistakes I ever made was early into my real estate career.

It’s such a simple yet important lesson that it would be crazy of me to not devote a blog post to it.

The lesson is this: Always have a home inspection done before buying a property.  There are no exceptions to this “rule.”

Here’s how I learned that the hard way…

In my early days of investing, I didn’t have a lot of money. (Note: it’s way easier to make a mistake or take too big a risk when you are financially inflexible. We’ll talk about this a little bit later).

As a result, a lot of the properties I chose to invest in were big-time fixer uppers.  Nothing wrong with that. The problem was that I tried to cut corners every way I could to be “financially savvy.” 

This tactic backfired on me one fateful day.

A good friend of mine helped me find a property that seemed like a great deal. Together we decided that I didn’t need a home inspection done. This was our rationale:

A home inspection would cost me 500 dollars (back in the 90’s, this was a bigger amount than it is today). To save that valuable money, I wouldn’t pay an inspector — my friend and I would “inspect” the property ourselves. 

After all, we could tour the property and see for ourselves what needed fixing, right? 

For example, we could turn on the faucets to see if the plumbing worked, and check if all the lights turned on.  And since we were going to renovate the whole thing anyway, how much did it really matter?

Fast forward a few weeks…

I got a call from my general contractor who was working on the property. He told me that there seemed to be some sort of problem with the electricity. He was having a hard time getting consistent power to his tools.

Having a bad feeling about all of this, I hired an electrician to come over and take a look. He opened up the service panels and low and behold, about half of them were on the edge of crumbling. It was a fire disaster waiting to happen. 

Needless to say, the power company arrived in minutes and shut the whole operation down. In the end, repairing all the electrical panels cost me far more than the $500 for a home inspection.

If I had paid upfront for a home inspector I would have known about the electrical fiasco waiting to happen. This means that I would have either:

A: Been able to choose to not buy the property after all, knowing it would cost a lot upfront in repairs

Or B: I would have been prepared beforehand and been able to budget for the repair 

What actually ended up happening was me being completely surprised (and then panicking) and having to react without much choice.

A few hundred dollars would have saved me from all that stress, and it would have saved me more time and money in the long run.  Having the information about a property that only a professional can give you puts you in the driver’s seat of decision-making and is well worth the cost.

The Penny-Wise, Pound-Foolish Catch 22

Did I decide to forgo the home inspection because I was simply being cheap? Not exactly.

As I mentioned earlier, I was a bigger risk-taker back in those days because I had way less money. There is a fine line between sensible frugality and unsensible risks. The latter was what I ended up doing.

Real estate investing is a risk to begin with — profitable rewards usually come after taking sensible risks.  On the other hand, it rarely pays to make your choices unnecessarily risky.  Trying to pocket some cash by forgoing a procedure like a home inspection is a classic example of how you can end up, in the long run, actually paying way more money and time than if you had done the more conservative thing upfront.

Bonus Lesson:

There’s actually another “rule” in real estate, related to this, that I may as well mention now:

Do not buy a property “sight unseen.”

The exception to this is if you are a big-time investor backed by plenty of funds, are buying multiple properties, and can afford to have a few of them not be profitable. I am guessing (just a hunch) that this is not the case for you.

Plenty of people buy sight unseen, whether it’s because they are living in a different part of the country or they have too much FOMO and feel like they have to put in an offer before they have time to even head out the door. 

While this can still work out alright in the end, my advice is to never (at least, with very few exceptions) buy sight unseen.

The bottom-line of it all, to quote an old-school maxim: “haste makes waste.”

In more modern terms: Taking extra risks to save money, as well as being in a hurry, are more likely than not going to backfire on you at some point. 

Summary: