““Risk comes from not knowing what you’re doing.”
– Warren Buffet
If you’re considering investing in a multifamily property and do not personally possess extensive knowledge and the time needed to thoroughly inspect the property’s systems including HVAC, plumbing, electrical, roofing, foundation, and more…then please, for your own sake and for the sake of your investment read on…
A lender’s inspection is nowhere near as thorough or detailed as you might imagine and does not provide real-world bids to estimate the costs you may be forced to cover for needed foundation repairs, roofs, sewage problems, or other concerns you may have over the next several months or years.
My guess is that you want to invest in a property you’re certain will produce sustainable cash flow, not considerable headaches.
So, when choosing to invest in a multifamily property, you need a thorough understanding of the condition of the entire property, every system, every building, and every unit.
A lender-paid inspection is performed to provide an overview of the property.
They typically inspect about 15% of available units and look for generalized, major deal-breaker problems.
They are looking to ensure the “Minimal livability” of the units.
What does this mean for you?
Consider this…
You go through with the purchase of a multifamily home only to realize…
- The roof, which passed your lender’s inspection, will need replacement in the next two years. Roof replacement for a medium-sized apartment complex could cost anywhere from $100,000 to $500,000 or more, depending on the complexity of the project.
- Finding that some units have Federal Pacific Electric Panels that must be replaced due to their known risk of failure, or worse yet, the panels are located inside closets which must be relocated. Upgrading or replacing electrical panels in an apartment complex can cost anywhere from $20,000 to $100,000 or more, depending on the number of units, the existing electrical infrastructure, and the complexity of the upgrade.
- Many of the HVAC systems that passed your lender’s inspection are actually on their last legs and will need replacing within the next year. HVAC replacement costs can range from $3,500 to $5,000 per unit.
- Replacing or upgrading plumbing systems can cost anywhere from $5,000 to $10,000 per unit, depending on the extent of the work needed.
- Repairing or repaving a parking lot can cost anywhere from $5-$10 per sq foot. For a complex with 50 to 100 units, this could range from $50,000 to $150,000 or more.
These are just a few examples of how quickly unexpected repairs can eat away your profits.
Knowledge Is Power
When it comes to investing in a multifamily property, knowing the precise conditions and needed cost of repairing or renovating systems arms you with the information you need to negotiate a fair price, insist on needed repairs, or walk away knowing the potential for problems and expense were too great.
OMNI due diligence provided by our professional team will assess every major system in every building, in all available units.
When it comes to investing in a multifamily property, knowing the precise conditions and needed cost of repairing or renovating systems arms you with the information you need to negotiate a fair price, insist on needed repairs, or walk away knowing the potential for problems and expense were too great.
This includes:
Our team of experts consists of Foundation specialists, Master plumbers, HVAC technicians, Master electricians, roof specialists, and exterior specialists.
Once our review is complete, we compile the collected information and provide an overall report of the property and budgetary numbers on the above items if repairs or updates are needed.
We include pictures, interior walk-through spreadsheets, and a Due Diligence Summary Video so you have the information you need on all major systems and every accessible unit.
With this detailed report in hand…
- You will gain a clear understanding of the current condition of the units, buildings, and overall property.
- You will know what repairs must be done immediately and have an estimate of the costs involved.
- You will know what repairs must be done immediately and have an estimate of the costs involved.
