In the previous article I talked about estimating repairs and how to quickly and accurately get an estimate. I want to talk further about some of the major things to keep an eye out for when doing your initial walk through and your inspection walk through. When you are doing your initial walk through, try to include your property manager if they are available. When doing your inspection, be sure to include the property manager, contractor(s) and property inspectors as well as the rest of your team.
1. Understand the age of the property and it’s challenges. Late 1800’s and early 1900’s built houses are often built very poorly with limited standards. Often the joists, rafters and foundations are undersized. Many times porches are missing footings and additions just got slapped on. Look for crumbling foundations, heaving basement slabs, major cracks in the plaster, floors that aren’t level, cracked joists and rafters.
Properties built before 1978 will often have lead and asbestos, so watch for that. Those items are not bad if they don’t get disturbed, but touching them, may lead to the need for abatement. Also, properties building in the 70’s and earlier often have galvanized, cast iron or lead water lines/waste lines. These often rot out and cause major issues, so be prepared to replace those. Same goes with knob and tube wiring and old furnaces, AC’s or boilers.
Properties built in the 1980’s and early 1990’s are often nice looking from the inside and outside, but in general they are poorly built. In my experience we built houses well in the 1940’s-70’s and then did things cheap in the 80’s and early 90’s. Look out for soft/spongy floors, bowed walls, wavy roofs, etc.
2. Look for structural issues. In the basement you will want to look for cracks in the foundation. A long, horizontal crack can be evidence of a foundation that is bowing in and will eventually cave in. Vertical cracks/stair step cracks are often evidence that one corner is sinking, which is often due to water pressure. Both of these need to be addressed if the crack is much larger than ¼” open. Hairline cracks should be looked at to see if they have been patched. If not, then they are usually nothing to worry about.
3. Look for cover ups. Is the foundation covered in areas it shouldn’t be? Did the seller recently paint a vacant unit, especially if it has been down for a while? Recently I walked a property the seller freshly painted a unit. You could clearly see they painted over mold. Look for spots that the wall looks like someone peeled the drywall paper or there are faded spots. Those are signs of mold or water. Same with the ceiling. Look for patches or cover ups that indicate a leaking roof.
4. Pay special attention to the mechanical components. If they are older than you, then they need to be replaced. Water heaters last 8-12 years, furnaces and boilers last 20-30 years, roofs last 20-30 years, galvanized, cast iron and lead piping is too old and needs to be replaced, even if it looks like it’s in great shape. Fuse boxes need replacement to breaker panels (some panels that have breakers that are no longer manufactured need replacement: Federal Pacific).
5. Look for moisture issues and penetrations in the building. Water, bugs and pests are major problems to buildings. You get a mouse infestation and not only will you lose tenants, but they can chew wiring and tunnel into insulation. Bees, birds, bats, squirrels and other animals can wreak havoc upon your buildings if they find their way in. Termites and carpenter ants can cause major damage as well. Water can be the worst and most costly of them all. Pay attention to evidence of any of these. Wood shavings and small holes may be from pests. Water in the basement or peeling paint at the baseboards in a basement unit could be concern for moisture.
In closing, estimating repairs can be difficult even for the most seasoned investors. Try not to be tight on your budget, as it is easy to go over budget. Contractors may tell you they can get it done for $5,000/unit, but contractors make a lot of money on extras and they likely will be happy to charge them to you.
Listen to our podcast on this topic: https://soundcloud.com/user-650270376/powc-57-apartment-series-15-estimating-your-repair-budget-continued
To your success!