Planning on buying a multifamily investment property? If so, one of the most important things that you will need to do before closing the deal is to have the property inspected.
If you’ve never hired an inspector before, or inspected a property yourself, this article will provide you with items that will be checked by the property inspector.
Tip – It’s always a good idea to be there in person (especially if it’s your first multifamily deal) because, being able to see what the inspector sees firsthand will give you excellent experience with the inner workings of multifamily properties, enable you to ask questions, and even videotape the items that the inspector points out to you.
#1 – All Major “Systems” At the Property Will Be Inspected
Once you hire a property inspector, the first things that they will inspect are all of the multifamily property’s major systems. These systems include the HVAC, plumbing, structural, roofing and electrical.
When reviewing the condition of each system, an inspector will be paying close attention to the true condition of each major system that the property has. This part of their report will be vital to you because, as an owner, you are going to want to know if the roof, plumbing, HVAC or electrical needs t obey replaced or not.
The inspector’s report will also provide you with inside information into how each major system was installed and let you know if it was installed correctly or not.
Besides inspecting all of the major systems that the property has, an inspector will also include in their report information on things like the overall condition of the property and if it’s draining water properly as well.
#2 – Every Unit Will Be Inspected
Besides inspecting the major systems, another important thing that a property inspector will do is inspect every unit individually. This task is imperative because even it’s possible that some units may contain mold or have other damages before those units are in rentable condition.
Thankfully, if the inspector’s report comes back with bad news about several of the multifamily units, their report will also contain recommendations for things that you can do to get each unit in excellent condition again.
For example: Let’s say that several units are drafty and have severe energy losses during the year, the solution to this problem is to add new seals to the doors and windows so that the heat or cold from the HVAC unit cannot escape the property during the year.
Solutions are what you’re going to need as an owner and you can without a doubt expect them from the property inspectors report including the cost of repairs so that you’re never left in the dark when it comes to what it’s going to cost to get a property in rent worth condition once again.
Should you inspect units yourself? The answer to this question depends on your level of experience when it comes to repairing things like electrical, plumbing and other construction-related issues. If you don’t feel like you’re qualified to do inspections, it’s best to move forward with hiring an experienced inspector because even though you may pay $150 per unit, to have each unit inspected, this investment may save you thousands in the long run.
When talking about the price of inspection that you’re going to have to pay per each unit, keep in mind that a property inspector may charge you a different amount based on the building and age of the equipment that the property has.
Tip – When walking the units with a building inspector, if you have the opportunity to meet your new tenants, always introduce yourself as the new property manager, instead of the owner. This step helps each tenant to put their guard down and it makes them more open to sharing with you what’s really happening with the property that the real property manager may not be seeing.
#3 – The Foundation Will Be Inspected
Yes, the foundation of a multifamily property is one of the most important pieces of the property because a poor foundation can make or easily break your investment.
A trained property inspector will be looking closely for things like cover-ups that the current owner may have tried to keep their tenants or a trained inspector from spotting. They will also be able to point out things like uneven floors and vertical cracks that a property may have and are also signs that it may have severe foundation issues.
What Else Should Be Inspected?
Besides having the condition of the multifamily property inspected, some of the other things that you should inspect before buying a multifamily property include the following:
Service Contracts – These are contracts for services that are performed on the property and they can include services for things like lawn care, trash service, laundry machines, and snow removal. Many of these contracts will survive the sale of the companies are providing good service but you should review each contract carefully.
Utilities – Always review utility bills including electricity, gas, water, and sewer because you want to confirm the utility bills that you will be responsible for paying.
Laundry Contracts – Digging deeper into the topic of laundry services, it’s important for you to know that these types of contracts can be difficult to get out of so it’s best to read the language of the contract carefully to confirm if there is a 30-day window to cancel or change the contract upon transfer of ownership.
Inspections are the most important part of buying a multifamily property. Pay close attention to them because this part of your due diligence is what’s going to confirm that you’re indeed buying a great multifamily property that will produce excellent ROI or not.