Multi-Family Millions by David Lindahl

Author:David Lindahl
Language: eng
Format: epub
Publisher: John Wiley & Sons
Published: 2012-06-02T16:00:00+00:00

When analyzing a property, just as important as the financials is the physical condition.

You need to walk the entire property, with your radar on full power. Look for any sign of problems.

Check out the trim and woodwork on the exterior. Is all the paint intact, and the wood smooth? If you see a lot of odd texture under the paint, the owner probably painted over rotted wood. It’s so common that there’s a term for it: Lipstick.

If there is a board on the very bottom of the siding, and it runs along the bottom all the way around, it’s a red flag. This usually means the wood beneath is rotted and they didn’t want to replace the siding.

Take a look at the windows: Are they in good working order?

Check out any brick: Are there any long, vertical cracks? This is a settling problem, and it may or may not be major.

Are the corners of the shingles starting to rise on the roof? This is a sign of age. The roof is a major expense, not only for labor and materials, but also because you may lose rental income while some units are open to the blue sky.

You must factor in any roof repair at the time of purchase. If you cross your fingers and hope you can just flip this property quickly to another buyer who can worry about the roof, you’ll be sorry. Sure, hold off on repairs for as long as you can, but negotiate right up front to get a price break to pay for that roof while you own the property.

Is the grass greener in certain areas? This usually means one of two things: You’ve just found the location of the septic system, or a pipe is broken underground.

If it’s the latter, either the seller’s or your contractor must dig up those pipes and fix them. This has happened to me, and it can be costly. Ask tenants if they’ve seen people fixing pipes. If they tell you that pipes break all the time, this is a big problem.

If you’re considering a property with buildings built on slab foundations, you may run into a common problem. In some parts of the country, copper pipes react with the local cement mixture. Over time the pipes deteriorate and start to leak in the slabs.

This is a very costly repair. You will usually see very high water bills on a property when it has this problem. Ask your inspector to take special care to investigate that particular problem.

Also look for standing water. It’s a sign of a high water table or broken pipes.

When walking the property, walk the perimeter. Check out who your neighbors are. Are they all residences for a couple of blocks away, or are there businesses within sight?

If there are businesses, what kind are they? There’s a greater chance of toxic substances being released onto your property if there are gas stations, dry cleaners, or storage facilities nearby.

Why storage facilities? Because people store toxic chemicals in barrels and never come back.

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