Inspections & Appraisals

I don't mean to sound like a dead horse, but I'll step out on a limb and do just that.

In recent months, I have seen 2 situations where NOT getting an inspection has back fired.  In the 1st instance, the buyer did not do due diligence in knowing the area where the house was purchased.  Scarier worse is he did not do an inspection as a condition of purchase.  We've come to later find out the wiring is a fire hazard waiting to happen...not if...but when.  Some prior owner had electrical work done and it was a hodge podge of inferior work.  Work that can cause a fire, damage property, and possibly cause death.  In the 2nd instance, the furnace broke down.  Again, it was a hodge podge of pieces parts.  1 HVAC company condemned the unit as the belief was there would be too many (quantity) and expensive repairs in the future.  The company that did the 2nd quote (and eventually make the repair) said the furnace was a 11k BTU but the house only needed 6-8k BTU, resulting in constant shut offs.  This owner did NOT get an inspection.  If he had, the report would have likely shown this discrepancy and related effect on the house.

This is becoming more the norm than the exception.  And I'll be honest, as a property manager, that scares me.  Yes, there is a cost for an inspection, but it's well worth it given the information you are receiving.

I've heard too many cases where buyers had no idea the amount of maintenance needed after they've closed on the property...all because they didn’t want to jeopardize or risk the deal by making the offer contingent on an inspection. 


An appraisal factors in property condition and considers the subject property with respect to other similar properties that recently sold in the area.  Can I tell you there is nothing worse than over paying for a property and then needing to increase the rent unrealistically just to be able to make the finances (cash flow) work on the owners end.
Can I tell you that reality in the Cleveland rental business will NEVER substantiate such a scenario.  Vacancies will be the norm because no one will want to rent at the inflated rates...in ANY area of town.  When maintenance costs are constrained due to cash flow issues, tenants will more likely move out.

An appraisal can be your best friend in negotiating price.  BUT!!  It can also be your best friend in determining if you need to walk away from a property.  I get & understand about perhaps bidding over the ask price in competitive situations.  BUT, at some point it becomes obnoxious.  And that is before the lender even goes thru their approval process.

There’s nothing worse than having market rent NOT support your mortgage and property tax payments.  Your mortgage payments will be determined based on purchase price as well.  But if you're paying 100k-150k over appraised value (and I've seen it done...to a detriment), how much more is your mortgage payment?  How much does that eat into your cash flow...the extra monthly mortgage payments because you WAY over paid?  Property taxes, insurance (read your declarations page, especially if you're only insured for FMV), and other factors relating to property value will eat away at your bottom line.  While I do like to push the envelope for rental rates, I can't ask 1150 on a 1 bedroom in an area where 1 bedrooms are going for 800-900.



If you are a real estate agent, regarding the buy and sell of properties.  We work WITH licensed real estate agents...YOU keep the buy and sell transactions.  Every.  Single.  Transaction.  Guaranteed. 


D & K Property Management Services
Karen Bostwick

(440) 590-5925

KarenMBostwick@yahoo.com

https://dkpropertymgmtsvcs.blogspot.com/

Broker License 2018002999

Comments

Post a Comment

Popular posts from this blog

City of Cleveland planned crackdown on non compliant rental registrations

This past Feb, city council for the City of Cleveland passed the Resident 1st Legislation.  There are now additional tasks local agents in charge must certify in order for your property to be legally registered. Aspects of it include: Property taxes are current. Common area utilities (water, sewer as the example) must be current. If the property has 4 or more units, a licensed HVAC contractor must sign off on its operation. A local agent in charge must be designated...this person becomes legally, financially, and physically responsible for your property. The owner (if not an individual) must have a good standing certification with the Ohio Secretary of State). The property must be lead safe certified.  This is with the new more stringent process that will take longer to complete and cost significantly more. The bigger implications I'm anticipating is at the new year Cleveland Housing Court will want proof of this compliance at time of eviction filing for the court to consider ...
Read more

City of Cleveland Lead Safe Certification Changes / Updates

Previously, the City of Cleveland only required essentially a lead clearance test to show a property was clear of lead hazzards.  Because the number of cases of children with elevated blood levels had not reduced in the 2 1/2 years this program was implemented, the City is now requiring a full fledged Lead Risk Assessment.  This requires additional reporting, additional testing (2 sets of samples are now required), AND the landlord must also get tenant(s) signed disclosure that the tenants know about the Lead Risk Assessment report itself AND the work required to be done.  The disclosure and related work would then be updated as part of the city's rental registration portal.  An occupant license / rental registration would not be issued until the work is completed by a Lead Abatement Contractor and / or RRP Contractor.  The Lead Abatement Contractor is licensed with the State Health Dept.  The RRP Contractor is licensed with the US EPA. This went into effec...
Read more

Red Flags from a Phone Call

 I took a phone call last week from a potential investor.  From word 1, he was complaining about how much everything costs involving a rental unit.  Cost of labor.  Materials mark up. He had tasked a new PM with posting a 3 day.  It had been almost a week & it wasn't yet posted.  My immediate question / comment is "Are you paying her to post the 3 day?"  If not, she's busy with work that IS paying her for her time and that 3 day gets posted only when more pressing work (paying her time) is done. In terms of vacants, I asked this investor if he takes the time to make sure they are rent ready with no lingering issues.  Or is he rushing his crew to do next to nothing on the unit.  Does his vacants look shabby to the possible renter?  I explained to him that when my husband & I prep a vacant in the portfolio of rentals we own (that we've oved for over 10 yrs now), we make sure we are putting out a product we can be proud of.  In...
Read more