Purchasing an apartment complex can be both exciting and stressful. On one hand, you are taking steps toward accomplishing your goal of real estate investing and doing something you are passionate about. However, along with the possibility of living the life you have long envisioned for yourself, there are many potential pitfalls that might be encountered in the process. Whether you are a first-time investment property buyer or you have successfully closed several transactions, these seven property inspection tips will help improve your likelihood of making a profitable investment.
Start at the top
Roofs are costly to replace yet very valuable for protecting the interior and structure of your buildings. It is important to have a good estimate of the remaining useful life of any roof so you can properly budget for a replacement.
Foundation problems are not always easy to spot. It is best to use an experienced professional who knows what to look for and where to look. Purchasing new construction is no guarantee you will avoid foundation problems – it only means they will not be noticeable for a few years.
System inspections should also be conducted by certified professionals. The National Association of Realtors recommends discussing in detail what your inspector will assess prior to ordering the inspection. You should only use inspectors with thorough commercial property inspection experience.
You should walk through every unit yourself to note the general condition of each one and any issues that need attention. This also gives you an opportunity to note the quality of existing tenants and how to budget for turn costs, which are the costs you incur preparing units for new tenants when the units are vacated.
Review service contracts
Your service contracts with landscapers, trash removal, and HVAC contractors should survive the sale. Be sure they do and read the details of each. You want to be aware of what is being done on your property and of the contractors’ responsibilities. You might be better off searching for new service providers.
Be sure all utility bills are paid and you know which utility bills you will be responsible for paying. This typically includes gas, electric, water and sewer, but there may be additional costs and fees imposed by the local municipality.
Audit existing leases
It is a good idea to review background checks and look for any tenant-specific variations in the rent roll. You want to be sure collected rent amounts match the lease and that there are no special clauses allowing some tenants discounts or free rent for some duration.