What to Expect When Inspecting
In last week’s newsletter, we discussed home variability and how a lack of uniformity contributes to challenges in property renovations. Equally important to the initial renovation process are the initial inspections and then the ongoing repairs and maintenance.
While at Auben, I rarely lost sleep over inspections because our size and scale allowed me to see every home somewhere (often everywhere) in the process. However, during my time managing renovations for the hedge fund, we were completing over 100 renovations a month and needed detailed, visible checkpoints.
As we attempted to standardize renovations, we also worked to improve our inspections, repairs, and maintenance processes prior to occupancy. One of our first attempts was to incorporate detailed inspection assessments prior to listing our homes for rent. We hired individuals with construction and renovation backgrounds to inspect the work of our project managers in an attempt to catch flaws before listings hit the market. We also allowed property managers to walk our homes and create their own punch lists.
In markets with post-occupancy or quality-control issues, the inspection process became absurd. We would have our renovation manager do a final punch list on our contractors. Our inspector would then inspect the work of our renovation managers prior to listing. Our property manager would then do a pre-listing inspection. Finally, one of the above (or sometimes all three) would come back and do a pre-move in inspection before the resident moved into our home.
How did we manage to continue missing items?
Because the lenses our folks were looking through were different for every person.
We discovered our property managers and inspectors usually focused on different things and both needed calibration. Inspectors were consistently focused on technical workmanship–zeroing in on if things were square, level or plumb. While property managers would tend to only look for paint overspray and curb appeal.
Both parties were right–and wrong–simultaneously, and it required a lot of hand holding and collaboration. Our local teams were created to work together, but this handoff from Renovation to Leasing was contentious even with our most functional teams. The inspectors who were intended to be Switzerland (diplomatically neutral) seemed to have a hard time understanding that the homes were not new construction and could never be flawless. Our property managers who were routinely asked to achieve nearly impossible asking rents could not understand that the budget was not infinite.
I tried to reduce the process (and friction) to focus on safety, functionality and curb appeal.
For curb appeal, we did in-market training with the entire team gathering in the front yard at the curb of our homes and looking at the home from a prospective renter’s perspective. Most of our properties were fairly basic 1960’s ranch homes, which we made small improvements to like adding red mulch, painting front doors and shutters, and planting hearty, low maintenance bushes like boxwoods.
I was a stickler for curb appeal, as we were consistently pushing rent and were the highest-priced rentals in historically working class neighborhoods unaccustomed to the rental prices we were asking.
Inside our homes we had more attractive features like stainless steel appliances and new LVP (laminated vinyl plank) flooring, but we still needed to get our residents out of the car and through our front doors. One of the most routine scenarios we had was large budget home renovations having lots of issues post-occupancy. We discovered that the homes we bought that were in the worst shape, often had the most ongoing issues–no matter how much money we spent renovating them. There was a really strong correlation to the fact that these homes often sat vacant as distressed properties for long periods of time prior to us purchasing. No matter how much time and money was spent on renovation, trying to simulate heavy use of the mechanical systems as a result of the occupancy by a family was different. Families who had paid thousands of dollars to move into their dream home had collapsed sewer lines during their first week of living in their homes.
If you would like to learn more about what to look for when buying a home, reach out to one of our local market sales managers to be assigned to an investor-focused agent who can help you avoid some of the acquisition mistakes we made!