Are you a homeowner that has become a de facto investor?
I recently read an article that was featured in the Oct/Nov issue of NARPM's Residential Resource magazine. It was written by Kevin Mackessy, Broker-Owner of Blue Olive Properties in Colorado.
One of the most important question to ask a homeowner is "Do you promise to maintain this house?" Most will say "Yes, of course"
"Many owners, who are now de facto investors, have no idea what can come up in the course of renting residential properties. If an owner is going to put a house on the rental market, you must make sure that they a re going to maintain the property. Owners often have deferred maintenance issues that they have learned to live with. The problem is, as all property mangers know, tenants are not as forgiving. Nor should they be. If an owner is going to put a house on the rental market, it must be in a safe, clean and fully operable condition."
How can you transition from a homeowner to a real estate investor?
Some property managers may require that a home inspection be conducted on all homes they will manage. Others may have internal staff that will view the home prior to agreeing to market. Smaller companies may outsource that responsibility to a subcontractor, realtor or leasing staff to view.
I really like the idea of a home inspection prior to taking a listing. Sure, it may slow down the process on the front end BUT the benefits of having a very clear baseline condition report is extremely valuable and could certainly save a lot of headaches for your maintenance team and property managers during tenancy. This could also head off any potential dangerous problems.
Home Interior
Interior walk-through checking to ensure every door opens and closes properly, fits the door frame and that all door locks are functioning. Test every light switch and check that all power outlets are working. Inspect the walls looking for cracks and damage. Verify the ceiling does not show signs of water leaks or other damage. Keep an eye out for mold. Test each window, look for soft spots in the floor, inspect stairs and railings and check that all smoke detectors are working.
Kitchen and Bathrooms
Open and close every cabinet and drawer. Check beneath the sink for signs of leaks, ensure the hot and cold-water faucets are labeled, working and that all sinks drain properly. Inspect the stove, ensuring all knobs are present and the burners and oven function. Check the refrigerator and freezer including the light, temperature and smell. Test appliances, the toilet, shower and exhaust fans. Inspect the shower stall, counter tops and floor around the toilet. Test ground fault receptacles ensuring they are working properly.
Inspect the attic, basement, utility room and garage areas, if applicable. Keep an eye out for signs of leaks, pests and any other damage. Look for cracks, rotting, irregular surfaces or discolorations. Examine plumbing lines and the electrical breaker box -- look for signs of scorched wires or surfaces, and blown breakers. Test the air conditioner and heater units to ensure they are working properly, and change the filter. Check the dryer vent and inspect the area around the hot water heater.
HVAC
Inspect the furnace and AC for proper operation or better yet, find out the last time it was serviced. Encourage the owner to maintain the unit with fall and spring check up services. Setting up default "tune up" every season will help avoid a tenant crisis in the middle of summer/winter.
One of our homeowners signed up for the seasonal "tune up"we offered via a third party. It was early fall and the tenant had not really been using the heater AND there were no maintenance requests from the tenant. This was just a "tune up" ordered by homeowner. The contractor found a dangerous situation that was alarming for all of us.
"The upstairs furnace had to be shut down. Very unsafe. It was producing Carbon Monoxide in the air stream (his meter showed 25ppm) and also had extremely high CO in the vent, over 2500ppm. This is more than enough to cause death if the heat exchanger opened up all the way. There were also flames rolling our the front of the furnace. Which indicated that air from the blower was getting into the heat exchanger. This furnace was 23 years old."