One of the benefits of using a private lender to finance your fix and flip or rental project is having technical experts at your disposal. Here at NavCap, our team has experience in just about every facet of real estate investing, and we are happy to share our hard-won knowledge with you.
That being said, we are able to warn you of potential pitfalls before you stumble upon them. Case in point are the environmental assessments and site inspections we require before your loan is approved.
In order to avoid any costly surprises, we have several requirements when it comes to environmental issues. It has been our experience that properties that rely upon private well and septic systems pose the greatest financial risk to investors.
Check Your Well
Therefore, we ask loan applicants for properties with wells to provide us with the results of a Well Water Flow Test & Basic Chemical Well Test Analysis. The chemical test should measure levels of Iron, Nitrite, Nitrate, Bacteria, Chlorine, pH & Turbidity (Radium and Lead are highly suggested but are at the discretion of the buyer). Beyond these analyses, we strongly recommend that the buyer obtain a salt water intrusion test to ensure that the well shaft has not been compromised. If it has, then, unfortunately, a new well must be drilled. Better to know that ahead of time so it gets reflected in your scope of work!
Assess Septic Situation
It is not just wells that need special attention. For properties with septic systems, we require inspection by a licensed septic/septage inspector. Inspection must include a written report detailing the tank construction material as well as the condition of the tank (including age if determinable), baffle(s), and drain fields. Inspection of the drain fields must include pick/auger inspection of all fields. Applicants must also have a Water Surge/Flow Dye test performed at the property (which requires that water be turned on at test time).
Before moving on, we should note that electrical power to the property must be on in order to test both the well and septic systems. Both systems must be running in order to be tested.
No Well or Septic?
For properties on public water and sewer, NavCap does not require any tests or inspections. However, we should point out that there is still some risk involved here. With every purchase, there is always a chance that there is a leak in the water main or elsewhere within the plumbing system. To avoid potential problems down the road, we recommend turning on the water prior to purchase. After purchase, any repairs to the water main will be the buyer’s responsibility and should be reflected in your scope of work.
Beware The Bugs
We also strongly recommend (although it is not required for financing) that our clients arrange for termite inspection of the investment property prior to purchase. By doing so, any future liability when the home is finished and sold is avoided. It has been our experience that as part of the final sales contract the buyer automatically assumes that if there is termite damage the seller will without negotiation be liable for 2% of the contract sales price.
What’s the Big Deal?
Why do we care so much about these site inspections and environmental assessments? It’s because we want each project we finance to run smoothly—on schedule and within budget. By paying close attention to a property’s environmental systems from the get go, our borrowers can avoid costly headaches later on in the reno process.
Have questions about what we require? Want more information about all of our loan programs? Reach out at 443.603.0193 or info@gonavcap.com for details.
And if you’re looking for your next project, we have off-market properties available for sale here. For those interested in our property at 714 Manning Road East in Accokeek, MD, it goes to auction on December 10th.