CEO/Founder of Smart Property Systems, Jack of all Trades in charge of delivering a best in class solution to customers.
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One question consistently at the top of any property owner’s or investor’s mind is, “How do I protect the value of my rental?”
One way to do this is to conduct in-depth tenant screenings, which I have written about here.
The second way is to conduct inspections — and do so regularly. Inspections are done by the landlord or person assigned to that task by management. As a landlord, I always went to my rental properties monthly to collect rents, which allowed me to observe the property’s condition. But now that rent collection can be automated, many investors have property management companies that manage their rentals, and in that case, regular inspections should be included in the contract.
Whether the owner or property manager conducts the inspection, the inspector should review the property inside and out with the tenant present so that deficiencies can be noted. The inside inspection should check the condition of appliances, plumbing and light fixtures; identify leaks; and check the general cleanliness of the place. The outside inspection should evaluate the paint and exterior surfaces, yard maintenance, the roof, fencing, pet droppings, yard care (if this is done by the tenant) and general appearance (think: no yard art).
I suggest that the landlord or property manager start with more frequent inspections with new tenants. If there is going to be a problem with the new tenant caring properly for the property, you will find it right away. Then you can actually “train” a new tenant as to what you expect when taking care of the property if you find problems at the first or second inspection.
An initial general inspection should be conducted at three months for every new tenant. This first inspection sets the expectation that you will find the place clean and in as good condition as it was when they moved in. Inspectors can also get an idea of how their tenant experience has been. If the inspection has good results, then you can wait longer before the next one — say, six months. If the inspection reveals a problem the tenant must address, issue a notice to have the problem remedied within a certain number of days and schedule a follow-up inspection for compliance with that notice. Failure to care for the property may be grounds to cancel your tenant’s lease. Be sure that any tenant failing an inspection understands that.
After you have found that the tenant is doing a good job of keeping the place clean, caring for appliances, etc., you may want to move to either six-month or yearly inspections. An inspection should be done before the lease is offered for renewal or six to eight weeks before the lease expires, depending upon the amount of notice that your state requires for termination of a lease agreement.
The Importance Of Regular Inspections
It does not take long for the condition of a valuable rental property to go south. One potential result of not conducting inspections is that the tenant signed to the lease actually moves out and lets other people into the unit as unapproved subletters. The old tenant collects rent from the new tenants (who are not identified on any lease) and then pays the landlord who has no knowledge of the arrangement. In one situation I know of, when this was finally discovered, there was horrible damage done to that unit — the cost to repair was over $25,000. The original tenant declared bankruptcy and could not be made responsible for the damage done. It fell totally on the landlord to repair the property.
Without inspections, there may also be unauthorized additional people or pets living in units. In these situations, there is often excessive wear and tear on the whole place. If pets are not taken outside (which may happen when the tenant does not want their pet to be discovered), carpets, floors, walls and doors can suffer huge damage. I have seen rental homes where three to five families live in one residence. Many problems can arise: tenants park on the lawn because there isn’t enough designated parking for all parties, or toilets and sewer lines become damaged or need to be replaced. In these cases, police may simply instruct the owner to file a civil case against the tenant for eviction. This could result in a months-long process to get a judgment, and during that time, more damage may be done by retaliatory tenants who aren’t able to repay the cost of repairs.
But these situations can be avoided with regular inspections. The process can be made simple by including inspection frequency and even dates in the lease agreement when the new tenant signs. Language can include giving the landlord/manager permission to enter the property if notice of the inspection is given but the tenant is not present at the appointed time. You can also use an addendum to be specific about what is expected of the tenant when caring for the property.
A Note On Commercial Properties
Commercial inspections are different from residential inspections. Usually, there are normal inspections scheduled for HVAC, elevators, the roof, heating systems and plumbing in the building that do not affect the tenants directly. But inspections of actual spaces usually relate to the terms outlined in the lease agreement and are to prove compliance.
For example, does the signage of the business conform to terms set forth in the lease? In triple net leases, the maintenance responsibilities are assigned to the tenant, not the landlord. So, inspections may center around the maintenance of plumbing, adequate exit corridors for fire codes and ensuring that codes are followed in the construction of tenant improvements. Most commercial inspections are conducted by professionals who can report any code violations to the local authorities.
Whether you own commercial or residential properties, regular inspections can ensure the care and safety of your valuable investment and help avoid unnecessary costs related to the failure of that care.
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