Avoiding the Money Pit
Assessing and maintaining investment properties in growing portfolios
In the classic 1980s movie “The Money Pit,” Walter (Tom Hanks) and Anna (Shelley Long) are house-sitting a New York City apartment owned by Anna’s ex-husband. When he suddenly evicts them, they decide to purchase a home and think they are getting a great deal on an estate outside the city. It soon becomes apparent that the purchase was too good to be true as the house falls apart, drains their wallets and, ultimately, destroys their relationship.
What Walter and Anna failed to perform was proper due diligence before agreeing to purchase the estate. They did not assess the property’s condition and paid in more ways than one. While Walter and Anna bought the property to make it their own home, real estate investors also need to do their homework when purchasing properties for their portfolios and then continue to manage them throughout the leasing cycle.
Managing rental or investment properties takes a lot of work. From getting the property rented by qualified tenants to executing the lease and collecting rent, it can become very time-consuming. Often real estate investors hire property managers or management companies to coordinate these day-to-day tasks. Equally important is ensuring the property itself is a profitable asset and subsequently maintained so it remains in marketable condition.
Whether you own a large portfolio of investment properties spread across the country or a few local ones, properly maintaining those real estate assets is key to maximizing their value and your potential bottom line. You may want to consider a third-party property services company that can accommodate all your inspections and maintenance needs throughout the purchasing and leasing processes.
Property Service Firms
When engaging a third-party property services firm, determine whether it has flexibility and can handle any size portfolio—from one property to a large portfolio. And if you own assets in different areas of the country, a national property services firm with a trusted reputation for quality and consistent results is your best bet.
Many real estate investors seek opportunities to expand their portfolios to outside markets and often buy properties in bulk. Having a property services company in place can help put your mind at ease. You’ll know the proper services will be completed to ensure you have made the right investment. This includes inspecting properties before purchase and completing due diligence assessments.
Due Diligence Assessments
The biggest risk in attaining an investment or rental property is current damage as well as susceptibility to additional damages. Issues like vandalism, tenant neglect or natural occurrences can affect not only the property’s profitability, but also be expensive for you to remedy.
Investing in real estate can be a big risk. Mitigating those risks can be very difficult for growing investment firms. Performing due diligence will help you determine the profitability of the property you plan on purchasing. A comprehensive property inspection or assessment from a trusted third-party service provider is necessary to determine if the purchase makes good business sense and fits within the parameters of your current needs and portfolio.
Knowing if the property is a good investment from the beginning and completing reoccurring assessments, to managing tenants and turnovers, you have to ensure you are getting the proper services to protect your investment. To keep the properties in your expanding portfolio in compliance, some of the key routine assessments and maintenance services you should employ include required landlord inspections once a dwelling is occupied and turnover services between tenant occupancy.
Routine Inspections Services
It is important to continue to keep an eye on your properties while they are leased and occupied by tenants. This is something that often can be overlooked, but your property services company can ensure you stay on top of it through routine service options. These inspection services are helpful for tenant turnovers, move-outs, lease renewals or monthly check-ins when the tenant owns a pet or has any other custom parameters in their lease that require regular assessments.
The property services company will send a qualified field inspector to your property, document exterior and interior conditions, inform you of any damages and, if necessary, provide bids to remediate any damages in order to restore the property to a livable condition. These results include a written report on the condition of the interior and exterior of the property and detailed photo documentation. It also includes reporting on issues such as occupant neglect, infestation risks, roof damages, water intrusion and the presence of mold.
Your property services company also should perform a listing inspection to check on a property that is for lease or sale. Be sure to get documentation of your agent’s or property manager’s services, including placement of signage and marketing materials. A qualified field inspector will do an on-site assessment of a property to verify it is in marketable condition. For an interior inspection, the inspector can either schedule a showing or attend an open house to also document the interior condition and cleanliness of your property.
Operational Efficiencies
Employing a property services company with national reach will aid in your operational efficiencies overall. Results will be consistent, and properties will be maintained in a uniform manner by qualified, local professionals.
For example, a property services firm can help create processes for streamlined turnovers and non-emergency maintenance services. They also can be effective for completing eviction services and junk removal at properties that need cleaned out. To ensure you do not get trapped in a “money pit” and bogged down with unexpected expenses like Walter and Anna, creating these operational efficiencies will maximize the value of your real estate assets and safeguard your bottom line. Due diligence inspections and regular assessments and maintenance will keep the property profitable and minimize losses within your portfolio.
