Protect Your Asset – Inspect Your Investment Property

I met a Real Estate Investor who had not inspected his investment property in twelve (12) months. The tenants had left without a final inspection. When the Investor finally conducted the final inspection, there was substantial water damage from the tub. Black mold was growing on the ceiling and about a 12 inches up the walls.

The damages totaled almost $25,000 and it took almost three (3) months before the property was restored. The Investor could have avoided the damages by conducting quarterly inspections.

Consider approaching your asset like a business. Would you wait months or years to inspect your bills and records? Of course not, so why would you not conduct quarterly inspections on your investment property?

Many Real Estate Investors I meet all say the same thing, “I don’t have time to conduct an inspection on my investment property.” A way to save time and money is to hire a Management Company or Property Manger to conduct the quarterly inspections. Management Companies or Property Managers normally charge a percentage of the rent or a flat monthly fee. A major repair could be significantly higher than the cost of your yearly management fees.

Still not convinced you should inspect your property at least once a quarter? I heard a story about a Real Estate Investor who was sued because a tenant cut his hand on a rusty porch railing. The Investor lost and settled for almost $45,000 for the cost of hospital bills and damages.

Another Real Estate Investor had a build up of human feces in the toilets and bathtubs and on the walls. He had to replace all of the toilets and bathtubs. It took several hours and three (3) coats of paint to repair the walls.

One way to limit the amount of an possible repairs by your tenants is to include a clause for repairs and/or damages with a deductible amount. If the repair deductible is $150, and the repair is $300, then Tenant MUST pay $150 before a repair is made, thus limiting the amount of money out of your pocket. A home warranty may also lower your out of pocket costs. The repair deductible should help reduce the amount of repairs and/or damages reported by your Tenant. Demonstrate that you value your property, as should your tenants.

When you conduct the inspection, ask yourself, “would I live here if items needed to be repaired or replaced?” If the answer is “NO,” then make the repairs to show your tenants that you value them and your property. If your Tenant gives you a lot of excuses or problems when scheduling an inspection, consider that a red flag!! Immediately schedule an inspection because there may be damage the Tenant is trying to hide.

The following are suggested of areas and items to inspect. Consult professionals who are legally qualified to provide you with the appropriate information and how to complete repairs.

• Plumbing – Flush all toilets to check if they flush and fill. Inspect under the sink for any leaks. Do the sinks drain at a normal or slow pace? A slow draining sink is a possible sign of a clog or drain build up.
• HVAC – Check the filter(s). Manufactures suggest changing the filters every three (3) to four (4) months.
• Appliances – Inspect for missing knobs. Light all of the burners and oven to check for outages.
• Paint – Check for signs of peeling paint inside or outside. Also check the railings, along with the front and back door for any rust.
• Drywall – Inspect for holes, cracks or structural defects.
• Carpet – There should be no pulls or tears in the carpet. Check for any cigarette or other burns in the carpet. If you detect any snags try repair the snag so it will not cause further damage.
• Doors and Windows – Doors should close all the way. In the winter doors may shrink and in the summer doors may swell, so adjust accordingly. Windows should have no cracks or broken panes and have a screen for each window. Also check for any drafts which may cause heating/cooling bills to run higher.
• Blinds – Check for broken blinds, chords or blinds that may have fallen.
• Home Exterior – Inspect the gutters for any signs of damage. The gutters should be affixed to the home properly and should not have any leaves or debris present.
• Fire Safety Items – Test the fire alarms. Batteries should be changed at least once a year. Inspect sprinkler heads for damage. Have a minimum of one fire extinguisher per floor. Check for lint build up in the dryer.
• Power Outlets – Inspect outlets for any loose wires for missing cover plates. Inspect the main circuit breaker for any damage.

Gutters, windows and plumbing are areas that can cause a lot of damage if there is little or no upkeep. Water can also cause a lot of damage because it is almost impossible to predict where water will travel.

Conducting quarterly inspections will identify possible issues before it costs you a lot time and money. If you do not have the time, consider hiring a Management Company or Property Manager for your real estate investment team (REIT).

Pictures of Property Damage