Home Inspection Secrets Every Property Investor Must Know

Aaron Schroer (00:00)
it’s only one or two mistakes that

add a couple of 10, $20,000 to a project, like wow, I could have bought a lot of $300 inspections with that mistake. ⁓ So they come back around and realize, hey, I don’t know everything, I don’t know yet.

Erika (01:49)
Hey everyone, welcome to the Real Estate Pro Show. I’m your host, Erika, and today I’m thrilled to be joined by Aaron Schroer, the owner of Tennessee Home Inspectors. Aaron, it’s so awesome to have you on the show today.

Aaron Schroer (02:02)
Thank you, Erika. It’s good to be here with you.

Erika (02:05)
So for our listeners, Aaron, let’s dive on in. How did you get started in the real estate and investing world?

Aaron Schroer (02:14)
Okay, so I got into the real estate world. was doing some soul searching and looking for a career change. I was talking to a buddy of mine who was an appraiser and he recommended home inspection to me. He kind of knew my background and my history. And he said, I think you’d really enjoy it and be good at it. So I called up a buddy that I knew who’d done home inspections for my mom when she was perching her last house. And he said, come tag along with me, see if it’s something you want to pursue.

I was in 2009 and I ended up working with Bill for about four years before I started my own company. ⁓

As an investor, some of the marketing I was doing was joining investment groups to promote my company as an affiliate member. if you sit in a barbershop long enough, you end up getting a haircut. So I ended up buying investment properties and flipped a couple of houses. ⁓ so I owned commercial and residential and some small multifamily. ⁓ it’s been a good, some lots, some raw land.

So that’s been kind of a just a little thing on the side as I’ve been in the industry. ⁓ Then I started my own company, a home inspection company. I run a small team here in middle Tennessee. ⁓ We do a lot of houses and it’s been 11 years in business. We’ve worked with a lot of really large investors and small investors alike. ⁓ then doing that has just exposed me to a…

interesting real estate deals.

Erika (03:55)
Yeah, yeah, I’m sure. Let’s talk about Tennessee Home Inspectors for a bit. How does your company tailor your services to meet the needs of the investors that you work with?

Aaron Schroer (04:06)
Number one is being flexible. investors have their own idea of how they want to do things. I always say there’s kind of three stages of investing or three types of investors. We’ve got our freshmen, our sophomore and our senior investors. I think of the seniors like your real estate investment trusts, your Wall Street money, the big companies. ⁓ When they approached me in the beginning about doing inspections, know, they’re sitting in a boardroom.

looking at inspection reports from 16 different states at that time and they wanted every report to be the same. Well, many home inspectors are kind of tied to their product and they only stay with that one product and doing that one thing. But for them, I was like, absolutely. I need a customer, you’re a customer. Our first year in business, we did 400 work orders together. So it was amazing and it was

but I had to do it the way they wanted it. And it wasn’t a…

state compliant home inspection. they had their own report and at the bottom of it, it says this is not a home inspection. And I was okay with that where many home inspectors wouldn’t be. And then since then it’s been the same thing. I’ve got inspection companies that are, I’m sorry, I’ve got investors that I work with who, you know, they don’t want a 60 page report. They want a two page report, a three page report, something that is very tactical, tactful that they can use.

quickly and easily and digest. don’t want to know about every door stopper that’s missing or things like that. So they want the big stuff. They want an overview of the property. They want to be able to budget and plan with their capital expenditures or capex budget. So working with them with a platform that they want in a way they want to be served is most important. I always say those freshmen investors are the new people in the real estate group.

We got people trying to get into the industry. They’re wholesalers. They may be doing their first deal ⁓ So they need a little bit of hand-holding and they get inspections when they’re doing their first deal and then after that we kind of get investors who the sophomore which if you look into the the word sophomore and break it down in the Latin it means wise fool, right so these people often decide they’re not gonna do inspections and

it’s only one or two mistakes that

add a couple of 10, $20,000 to a project, like wow, I could have bought a lot of $300 inspections with that mistake. ⁓ So they come back around and realize, hey, I don’t know everything, I don’t know yet.

that’s another thing is keeping it affordable for investors. They don’t want to pay seven, $800 for a single family home that they’re purchasing. So we try to get them something that’s around 300 bucks. It’s a lot easier to.

to swallow that and add it to the line items and budget accordingly.

Erika (07:49)
Yeah, that makes a lot of sense. When it comes to the investment properties that you look at, what’s typically like the most common issue that you might uncover?

Aaron Schroer (08:01)
In Tennessee, it’s water problems, right? Cross-base houses have moisture intrusion from bad grading and a little bit of neglect. ⁓ Along with that, they’re probably looking at some fungus treatment, maybe some wood rot termite stuff. That’s usually the biggest issue. Most of the stuff that is cosmetic in nature is already on their radar. You know, we might identify some…

some electrical updates they didn’t anticipate. ⁓ Roofing problems happen, but usually that’s kind of visible from the ground anyway. ⁓ But sometimes, you know, we get in there and we got to break the news and hey, it’s only a hundred amp electrical service. So they’re probably looking at either upgrading the electrical or adding a gas line to the house and converting some of the appliances to gas to be able to accommodate a more modern.

setup.

Erika (08:57)
Yeah, yeah, with something like that, you know, that could that could make or break a deal. Do you have a story that kind of fits that idea that, you know, the inspection, you know, made or, you know, broke a deal?

Aaron Schroer (09:10)
A lot of them. A lot

of them. So, you know, some of the things we look at, ⁓ we’ve got clients who are wholesalers and

for a lot of times they don’t get an inspection or, you know, they’ll just like, you know what, I think on this one, they’re looking at this, you know, they’ve got a house subject to it’s or they’ve just got a, you know,

contract on it that they can reassign the signable contract and you know for them they might like okay I see this house I think I’m gonna keep it rehab and add it to my portfolio if it’s not you know if I’m missing something then I’m just gonna I’m gonna turn it and sell it to somebody else and they can close on it so on those instances yeah I’ve had those go both ways where we’ve come

done the inspection like hey you got to do quite a bit of

subfloor, floor structure work. There’s just a problem over in this corner of the house. And they’ve looked at it and like, yeah, that just doesn’t make sense for what I want to do. So they find somebody it does make sense for. And then I’ve gone through on those and they’ve been, everything’s just what you thought it was going to be, no surprises here. And that peace of mind is what they need to move forward ⁓ with their own intention and their own plan for the house.

Erika (11:04)
Yeah. Yeah. You know, with your experience, I’m sure you’ve, you’ve seen a lot and you know, and one thing that we were talking about before we started the podcast was just the importance of these inspections. What do you think is like the greatest misconception when it comes to your role with properties?

Aaron Schroer (11:29)
A couple things, when we’re talking about investors ⁓ and investment properties, we can’t see everything. There’s going to be surprises, especially if somebody is going to do a rehab and it’s a serious rehab. They’re going to come into some unknowns when they start tearing stuff out. It’s a visual inspection and we’re somewhat limited on what we can access and what we see.

You know, in a room like this, somebody might decide to tear this paneling out. And when the knotty pine goes, like, you know, there could be a pretty big moisture, termite, rot issue around the window. And it’s like, Ooh, that didn’t plan on that. That was an unexpected expense. Usually there was some signs, but you know, people find out things to add to their budget that they weren’t necessarily planning. In the regular retail world, ⁓ you know, what

And then if you are an investor selling a property, you’re dealing with a retail buyer who’s going to come in and asking for all these repairs, updates, changes. ⁓ I like to let people know when I teach CE classes to realtors, I say, hey, we are not an authority. We are a person with an opinion. This is one man’s opinion about current property conditions. So if you’ve got a buyer lined up and they’re asking for some repairs, ⁓

You know, the home inspector said it needs this, the home inspector said it needs that. That’s, it’s subjective. So we want to keep that in mind. We want to temper it with knowledge. You know, one of the big things here in Tennessee is that we’re a very free state and we have people moving to Tennessee from more bureaucratic states and places where codes, certain things have to be brought up to codes at the time of a real estate transaction. Like we don’t get that here. So we’re not codes inspectors.

people ask us, is this up to codes? And I tell them, well, does it matter? Because codes ain’t coming. And that’s a thing that I kind of have to train our clients with. So that would be the same thing. If somebody’s asking for repairs on a house that you’re selling, we can look at those repairs and try to be judicious about, well, what really needs to be fixed and what’s just nice to fix. If it’s not up to code, but it was kind of grandfathered in from when that work was done, okay, great. But if it’s a brand new,

water heater for instance, yeah it should have probably been installed up to current codes for that area.

Erika (13:59)
Yeah, absolutely. From an inspection perspective, Aaron, what’s one key difference investors should understand when evaluating these properties and seeing if they’re a good fit? Like are there, you know, maybe some red flags that you’ve seen in a property type that investors may not notice?

Aaron Schroer (14:20)
Yeah, I teach a class for investors and I do have like a checklist that I give them with things to look at. So we need to have a pretty decent understanding of each system. ⁓ And then inside that system, are we comfortable with everything that we can figure out and find out about it now? Are we going to be prepared to make the necessary repairs, to bring it up to more modern expectations, depending on the goals of the house, right? So that depends on the neighborhood.

it’s in a up and coming neighborhood and it’s really trendy and prices are going way, way up, well, we can put more into it. If it’s a property that is out in the country,

the expectation of the standards of living in that area is a little different than what we’re gonna see in the inner city in a trendy area. So for there, what you can get away with not touching, leaving a loan or maybe upgrading to a… ⁓

decent standard, but not top dollar is important. So keeping an eye on the goals for the property, how much maintenance are we gonna put into it on the front ends? That’s a good question. Most of our big commercial clients, they want a capex of the next five years. What are we gonna fix in the next five years? They want a budget for those things on the front end. Is it gonna need a new roof in the next five years? Well, it’s easier for that project manager, for that estimator to get the money.

kind of earmarked, dog-eared, set aside for this project on the front end on the purchase, than to come back and ask for those funds later on. So they’re looking at, what’s everything we do in the next five years, we’re gonna budget for all that right now. And if the deal still makes sense, we’re doing it. If it doesn’t make sense, we’re not. And at the end of the day, it all comes down to the spreadsheets and if it makes sense, you know, and if not, they got to rework the deal potentially.

Erika (16:56)
Yeah, yeah, absolutely. Aaron, when it comes to teaching those classes about inspection, what is your favorite part of that?

Aaron Schroer (17:06)
I love the education. I do it as I started it. I’ve probably been

CE credits to realtors for about eight years and I’ve got six different classes that I teach. ⁓ It is one of my best marketing tools. It gives me opportunity to be in front of a group of real estate agents for one, two, three, four hours as an industry expert, not as a salesperson. So it’s a way for me to expand my base in the industry here. ⁓

But it also gives me, you know, like I got a goal that they list better houses. So if I’m teaching a class to listing agents, you know, one of their big concerns is as an inspector, are you a deal breaker? Right? Well, there’s a little bit of conflict there because, you know, the home inspector didn’t make up these issues. They took pictures and put it in the report. Like it was there. And we’re seeing the same stuff all the time. And as far as home inspections go, pages equal pain.

So if I can give you a list of things that I see on every house, like why not change the lights that don’t work? Why not replace your smoke detector batteries? Why not tighten up any loose fixtures? Like this is the stuff a handyman can do in a day. So you can negotiate a day’s rate and take off 10, 20 things that won’t be on a home inspection report. And each item on a home inspection report’s got a couple pictures. So like one item ends up being about this much. It only takes two or three items to be another page.

So buyers get this reaction in their gut when they open an inspection report. So by working with the listing agents, my thing is, well, let me help them do a better job listing better houses so that, our job’s easier. don’t have to make the

time is faster. The buyers are not scared of what’s going to be in the report. And there’s less conflict between agents and home inspectors.

That’s a big deal for me is how can I educate, help them do a better job? And then the same thing when I’m working with buyer’s agents, how do I help them set expectations about what is and what isn’t a home inspection so that we can kind of bring that Venn diagram between expectations and reality and the more overlap and the closer we can get those together, the better we’re all going to do together. And then with investors, it’s, you know, that’s kind of another thing where.

I want to help investors make better decisions so they’re more profitable. ⁓ And I’ve made some bad investment decisions myself and there’s been a lot of learning experiences from trial by error there. So just sharing my knowledge gets me excited.

Erika (19:47)
Yeah, yeah, that is exciting. And Aaron, what is next on the horizon for Tennessee home inspectors? What do you see for the future?

Aaron Schroer (19:55)
So we’ve been growing through Middle Tennessee pretty well over the years, ⁓ but I like to stretch out larger and we’re going to be franchising the company. That franchise offering is about there. ⁓ We spent so much time developing the systems and processes to run a multi inspector firm and it’s gotten so smooth that I want to help other people have success that want to be home inspectors. Every now and then I’ll get online. I look at all the

the license inspectors in Tennessee and it amazes me how many of those licenses were issued and expired two years later and never renewed. And to me, I just see the broken dreams there. It’s like, man, this person did all the work to get licensed and they didn’t go anywhere with it. So if I can help some people have success in their business, that would be awesome. So I’ve been working with the consultant out of South Florida to be able to offer a franchise.

model for nationwide.

Erika (20:57)
That’s exciting. Aaron, before we wrap up, if our listeners want to connect

you, ⁓ learn more about what you’re doing, or maybe they need an inspection, what’s the best way for them to reach you?

Aaron Schroer (21:09)
Our website is GetAnInspector. So GetAnInspector.com is a great place to jump off and yeah, they can find our social medias there and reach out by phone or email or whatever.

Erika (21:23)
Aaron, thank you so much for being on the show today, sharing your expertise and inspections.

Aaron Schroer (21:28)
Thank you, Erika.

Erika (21:30)
And for our listeners, if you love this episode, make sure that you’re subscribed to the Real Estate Pro Show. We’ve got more conversations coming up with owners like Aaron who are revolutionizing the industry. We’ll see you on the next episode.