Don’t forget to look at Common Areas as part of our series on top 8 things to inspect before buying apartments. Here is the list:
- Inspect every unit
- Walk all drive and parkways
- Inspect all exteriors
- Inspect all mechanical facilities
- Leasing and business offices
- Common areas
- Maintenance shops
- Pool and pool systems
Common areas: The common areas are often overlooked when it comes to due diligence. These areas could include, but are not limited to: the computer or business center, the pool (which will be covered in part 8 of these posts), tennis courts, basketball courts, any fitness centers, the outdoor kitchens and gathering areas, the playgrounds, walking trails, dog parks, and any waterfront docks or spaces. The business center and outdoor kitchens are most commonly added to renovations in the initial renovation package or in any CapEx projects that happen later on. I would like to focus on the lesser items in the previous list that sometimes get overlooked. To update playgrounds, there are two corrections that can be made: first option is to build a playground in a new location. You can either leave the old playground in place or tear it down. The second option is to add a covering to protect the old playground from the elements. Both corrections would be a great improvement without breaking the bank.
Example during due diligence: Here is an example of one project that we completed in Dallas/Forth Worth area. The fitness center was a point of much concern to the existing management, and of no concern to the new management that was purchasing the property. The existing management thought that the fitness center needed to be upgraded with new paint, 2 new TV’s, and some new equipment. The new management saw the fitness center and could not fit any upgrade to it in the budget. The end result of the purchase was to leave the fitness center alone and not touch it during the following years renovations. After the property was bought, the exterior renovations were started. This included the pool, dumpsters enclosures, new asphalt, new fences, dog park, and new paint. The exterior renovations were complete within 3 months and then the interior renovations were started. When the interior renovations were started, the residents noticed that nothing was done to the fitness center. The residents complain about no changes and attendance in the center declined.
The new management took a long time to decide what to do. They finally asked us for a bid to update the fitness center. The bid came in about $10,000 higher than originally estimated for the fitness center. This was due to the long time the management took to decide on a project and our crews were working on other projects. The higher cost was due to the fact that the crews would have to remobilize back to the property. The management accepted the bid and the fitness center was renovated. When the renovations were done, the management company noticed the complaints about the fitness center decreased and usage in the fitness center increased to higher than ever before. In many cases, it is easier and cheaper to do all of the renovations at one time, rather than having a crew come back to complete extra items that were not in the original scope of work.