We wanted to share with you our top 8 items to inspect before you purchase a new apartment complex. These inspection should happen as part of your due diligence process. Here they are:
- Inspect every unit
- Walk all drive and parkways
- Inspect all exteriors
- Inspect all mechanical facilitates
- Leasing and business offices
- Common areas
- Maintenance shops
- Pool and pool systems
Inspect every unit: As potential owners have found out in many difficult and costly ways, apartment homes have a different set of problems that are unique to their classification. Having a visual inspection of every unit is a must. When a selling agent only wants to take you to every fourth or fifth unit to “save time”, this should raise red flags. The question in your mind is what do the other units that have not been selected look like? Items to look for in a unit will depend upon what the end result of the renovation will look like.
Some questions you should answer are: Have there been renovations before and what is the current state of the renovation process? What upgrades have been put in place and will the upgrades you want to do be the same and will your budget allow them? A big thing that is overlooked on many due diligence walks is resident items. Things to look out for are: multiple pets in one unit, hoarding, excessive number of residents, unapproved alterations, and even illegal activity. All of these issues could lead to a money pit later on when trying to work on renovations.
Example: In doing a due diligence of a 236 unit property, there was one unit in which the residents would not allow the inspection team with the maintenance personnel to enter. They would only the inspector to come in. This unit had a lot of damage. It had very damaged walls, doors, kitchen and bath cabinets, even the toilet and bath tub needed to be replaced. This damage to fix was on top of the normal renovation that was to occur. The bid from the contractor to bring the unit to a rentable position was $22,000 and 10 weeks to complete. Our team completed the unit repairs for $12,500 and completed them in 4 weeks. Had this unit not been inspected until later on, the needed work would have been a huge cost and time later on during the renovation process.