Importance of Property Tours
We have learned that visiting a property prior to submitting an offer is critical in making the best decision. What looks good on paper, might not be achievable once you walk the property, talk with the Property Manager and see the market.
Tours are usually conducted with the Broker and the sellers on-site Property Manager. A successful factor in the tour is to engage with the property manager and make them an active part of the tour. Make them feel comfortable and encourage them to talk candidly about any issues, problems or improvements they suggest with the property. This is the best way to gain valuable information that you might not otherwise learn. It is also critical to see the property at night. Observe the lighting and how secure the property feels for the tenants.
After the tour, you will need to update your underwriting based on your new assumptions. Confirm your capital expenditure and operational expenses.
Here is a list of common questions we ask and what to look for during your property tour.
General:
How long have you been managing the property?
What’s today’s occupancy?
Lowest occupancy since you’ve been here?
Who is your biggest competitor? What is their main advantage?
What is the main selling point for this property over the competitors?
Are there any down units?
Tenants:
Who lives here?
Is there crime on the property?
How do you screen tenants?
Do you accept felons?
What is your income requirement?
Are there any section 8 tenants?
Rents:
Are there any month-to-month leases?
When was the last time rents were increased?
Do you use LRO or YeildStar or do you set your own rent?
Do you think you are charging the max amount of rent or do you think you can push?
What is the retention %?
Is there a peak leasing season?
CapEx:
Are there any drainage/plumbing/mold/foundation issue?
How old is the roof? Any leaks?
When was the last time you repaired roof and parking lot?
Has there been any foundation work done?
Has the property ever flooded or storm damage?
Have there been any insurance claims against the property?
How is the lighting in the parking lot?
Does the property Sign need repair or replacement?
What is the interior conditions of the units? How many units to renovate? Cost to remodel?
How many HVAC units have been replaced?
Amenities:
Which amenities get a lot of use?
Which amenities would you add and at what premium?
Which amenities would you eliminate?
If I give you $150K, how would you spend it to fix and improve the community?
Renovation:
Is there a strong demand by existing residents for upgraded units?
Are renovated units rented by existing tenants?
Have residence left for newer or renovated properties?
You will also want to review the neighborhood and surrounding area. We will discuss this more in our detail in another blog.