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Do Real Estate Investors Need to Do an Oil Tank Scan?

Every investor knows the importance of due diligence when it comes to real estate property. But does this mean you’ll need to perform an oil tank scan on your next investment property?

These sorts of maintenance tasks can add up and cut into your bottom line. On the other hand, neglecting these essentials can result in bigger problems down the road.

If you’re not familiar with an oil tank scan, we’ll help you understand this process and whether you should include an oil tank scan as a part of your regular investment strategy.

What Is an Oil Tank Scan?

In the middle of the twentieth century, American homes made the transition from using coal as a source of heating fuel to using oil. While oil burners had made considerable advancements in the 1930s, oil had not become dominant until roughly the 1950s and lasted until the rise of natural gas in the 1980s.

This widespread use means that if you’ve purchased a home built between the years of 1900 and 1980, there’s a good chance that oil was used as a source of fuel during its lifetime.

Even if the home transitioned to another heat source since then, it wouldn’t be unusual if the oil tank remained buried somewhere on the property since construction codes didn’t demand their removal until the 1990s. Unless the previous owner(s) deliberately addressed this situation, the oil tank could remain buried to this day.

A tank scan is a method of locating these underground tanks. Sometimes they can be identified by signs on the surface, though in other cases, an oil tank sweep requires the use of Ground Penetrating Radar (GPR) or electronic imaging.

Signs of a Leaking Oil Tank

When an underground oil tank leaks, it cannot be repaired, only unearthed and addressed. You may be looking at an underground oil tank if you notice any of the following signs or symptoms:

  • Lack of vegetation in a particular area
  • Drinking water contaminants
  • The presence of oil in storm drains
  • An oily smell in certain parts of the property

The absence of these factors doesn’t rule out the possibility of an underground oil tank. Unfortunately, the only way to know with confidence is to have an environmental contractor perform an oil tank scan.

Can I Just Leave the Oil Tank Where It Is?

If the previous owner assures you that there’s no oil tank, do you still need to perform an oil tank scan?

The answer is typically “yes,” especially for homes built prior to 1980. Here are just some of the reasons why you should perform an oil tank scan on your investment property:

Oil Tank Scans Are Required by Your Financial Institution

Some banks and mortgage lenders will require an oil tank scan prior to approving a loan for the property. Additionally, some real estate agents will require you to perform an oil tank scan before they’re willing to work with you in selling the property. You may simply be obligated to perform a scan before proceeding with your investment.

Leaking Oil Tanks Damage the Environment

A leaking oil tank can spell danger for the surrounding soil and nearby water supply. Leaks can also contaminate neighboring soil. Unfortunately, this means that in addition to disposing of the tank, you’ll also be responsible for clearing away any contaminated soil, which can often be the biggest cost.

Oil Tanks Pose Health and Safety Concerns

Even if oil is not actively leaking from the underground tank, there will still be vapors that seep from the soil. These vapors can pose a fire and health hazard to you, your children, or your pets.
Many ingredients in fuel oil are also known carcinogens, so even if these fumes don’t cause immediate symptoms, they pose a long-term risk to your health.

How Much Does It Cost to Remove an Oil Tank?

Most investors will lack the skills or equipment to perform an oil tank scan. An environmental contractor should be called to perform a scan that adheres to the American Petroleum Institute’s guidelines.
In the best-case scenario, you’ll find no underground tank. But if you find an underground oil tank, removal fees can range anywhere from $4,000 to $15,000, depending on the size of the tank and if there is any surrounding soil that’s been contaminated.
Your insurance company may or may not provide assistance with this process. In many cases, your company will expect to be notified of any oil tank found on the property (or results of a negative scan), though your homeowners’ insurance policy may not pay for the removal fees.

Bottom Line: Why You Need to Do an Oil Tank Scan

Admittedly, an oil tank scan can pose a potential snag in your investment plans. But as we’ve seen, this often proves a necessary step, especially for homes built prior to 1980.
Ignoring the problem can only make matters worse and even prevent you from obtaining financing. Unless you have prior documentation from a previous owner, you should make sure to budget for an oil tank sweep on your investment property.
Plus, even if you ignore the problem today, there’s no guarantee that you won’t have a major problem tomorrow. If the tank is leaking, then this will only add to the contamination of the soil on your property.
In other words, you could be faced with a cleanup job that’s more hazardous and costly than if you’d performed your due diligence from the start. As with most things, an ounce of prevention is worth a pound of cure. By addressing your need for a scan early, you can ensure that you take the best mitigation precautions possible.

Strategy Is the Key to Success

Investors interested in older real estate properties face unique challenges, oil tanks being only one of them. But the right skills and strategy can make this a rewarding investment opportunity and diversify the type and number of homes that you incorporate in your larger plan.

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please call us at 212-537-5833 or text us at 917-267-9523.

Hard Money Loans: FAQs

Hard money loans are short-term loans that are used to acquire investment properties to rehab and then flip for resale or rent. These loans are used by real estate investors and others who are looking to finance non-owner occupied real estate.

Yes, we can often pre-approve you on the same day as when you apply. For a pre-approval letter, please call us at 212-537-5833 or text us at 917-267-9523.

Yes, we do fund rehab costs through a hard money loan. In fact, we can fund 100% of your rehab costs. To do so, you will need to complete a portion of the project. We then send an inspector to review it, and we distribute the funds for the completed work. The entire process takes 2 to 3 days.

Yes, we provide extensions up to 6 months or longer on a case-by-case basis. We understand the timeframe complexities when rehabbing or building a new project – we will work with you.

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