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The Importance of Inspections

Written by Connor Swalm

Jaime: Hi there, my name is Jamie Swalm and I’m here with Connor Swalm and we are the hosts of the Landlord’s Resource. Brought to you by Swalm Property Management where each week we educate and empower landlords just like yourself. Connor, how are you doing today?

Connor: I’m doing good today.

Jaime: All right, well, we’ve got a very special episode for you here today. So we’re going to be talking about the importance of inspecting rental properties. With the clients that we work with, with our owners, we view ourselves as wealth growing partners. So our role is to help you as a landlord grow your wealth through managing your real estate rentals in a way that increases their value, maintains their value, and ultimately allows you as an owner to achieve the financial goals that you have. And so part of that process is ensuring that your home is taken care of and one of the ways that is accomplished is through the inspecting of rental properties. And so we’re asked a lot of questions often about the rental inspection and today we’re going to talk about the when of the rental inspection, the why of the rental inspection and the how of the rental inspection. So let’s go ahead and start. Why don’t we start talking about the when of the rental inspection.

Connor: So when you should view the property depends on many different things. The first is, especially if you have in home maintenance or you have somebody you know doing maintenance, to have someone you trusted seeing the property. If someone you trusted has seen the property, they would have definitely let you know if something was wrong with the property. Now that should not be in place of an inspection. I’ll get into that later, but you’ll have a much better idea of the quality of a home if you have a trusted vendor or a trusted person there all the time.

Another thing is, are the tenants that live in that home, do they communicate well? So if you have a tenant who you never hear from, sometimes it’s a good thing, but you want to hear from a tenant when there is a maintenance issue. So in the past, if there’s been a maintenance issue, was it clear that it was communicated quickly and effectively as it should have been with a good tenant, that’s another thing to take into account and also what is the preference of the owner. So it is your due service to protect the wealth building capabilities of this property. And sometimes the owner will have an idea, maybe they want you to see the property every six months, once a year or maybe they don’t care. We recommend seeing it no less than once a year. Usually we see it before we re-lease the property. We’ll inspect the property and then the re-leasing is conditional upon a good inspection coming out of that.

But really it’s up to the owner and it’s up to you as a landlord. We give our homeowners one free inspection a year and then if they’d like us to do another, we have an inspection fee and some of our owners opt to have that and we see the property in a very detailed manner. We provide a report, we provide any preventative maintenance we think that we see should be done. Anything to look forward in the future. Things that’ll go bad soon. Maybe if we noticed that the water heater might be an issue in a year or so. So we provide a very detailed inspection report every time we go out and you should as well, at least internally you’re aware of the exact condition of the home after an inspection is done anyway.

Jaime: One of the most common mistakes that we see owners make is when they won’t hear from their tenant at all and they will just assume that everything’s good and they’ll be excited and then be like, wow, I have a great tenant, doesn’t talk to me, doesn’t bother me. Everything is fine. And then something will occur. And for a variety of reasons, they’ll go into the home and then they’ll realize that the home has been trashed or that there are significant maintenance issues that have been left unaddressed. Water’s a big one. Sometimes, water issues that are left unaddressed by the tenant will create mold issues. And it’s amazing because you as an owner might think, if a tenant was in that type of situation, of course they would call me and you want to make sure that as an owner, you’re not projecting the way you think on the way a tenant thinks.

And so we can’t overestimate enough the importance of doing regular inspections to protect your investment. And this technique alone can save you an enormous amount of money and time and hassle. So let’s talk a little bit more. Let’s drill down a little bit more on the why of inspections. Like why are they so important?

Connor: So as I said before, there’s one main reason and it is to protect the wealth building capabilities of the property itself. And there are two subsets of that. First, by going to the property you will be able to tell how poorly or how well the tenants are treating that home and it will also give you an opportunity to address it. So if the tenant isn’t cleaning the property, if there’s mold as a result of improper storage of water, something that was in the tenant’s control that they weren’t working with correctly or weren’t notifying you of correctly, you’ll be able to see that.

And also, what we’ve noticed whenever we do these inspections is there are a whole slew of lease violations. So not necessarily damage being done to the house, but definitely sometimes liability involved. We see a lot of cases where an unregistered animal or pet is living in the home. Sometimes multiple pets are living in the home and trashing the home. Scuffing the hardwood floors, trashing the backyard. Many different things could come up in lease violation. Sometimes there are possible county violations involved if the grass isn’t getting cut in a certain way or the lawn is not getting taken care of and any type of violation, any type of lease violation that a tenant would want to hide from you, you will definitely be able to catch when you thoroughly inspect the home.

So it is always in your best interest as a property manager to catch those before they become a real issue. Especially sometimes animals can be become a huge issue if there’s an unregistered dog living in the property and God forbid something happens with the dog and it bites a neighbor, that can be a huge issue for the homeowner. So you want to catch that as soon as you possibly can and get that taken care of. The second reason you’d want to physically do these inspections is so that you can scan for any maintenance issues that the tenant may have missed. So a lot of the times your tenant’s not going to know what they’re looking at. Maybe it’s a complicated HVAC system or they don’t know what a bad roof looks like, but you’ll be able to scan every single room, every single closet, the basement, every single bathroom, everything for a maintenance issue that you can tell will come up, but maybe the tenant doesn’t know will come up because they’re not aware of the signs of certain things happening.

So it’s always in the owner’s best interest and the property manager’s best interests to catch those problems before they are really an issue and then solve them. The best way to do that is if you have a professional or a person in your company who knows what they’re doing, go do the inspections themselves instead of relying upon the ability of a tenant to report something when it comes up.

Jaime: Yeah, that’s good. That’s all very good. So it’s important when you’re doing inspections to have a system. Often we’re asked, how do I do an inspection and what are the best inspection practices? And so let’s talk a little bit about the how of an inspection.

Connor:  So when I say inspection, I don’t just mean walk into the home, let the tenant know beforehand, walk around, notice everything’s good, shake tenants, hand and leave. That is not an inspection at all. We would never ever consider that an inspection. An inspection should have an entire report that goes with it. Especially if an owner is paying for an inspection. You should have an entire report. It should go through room by room. You should have pictures, you should have comments on anything you noticed. You should have comments upon the age of the appliances and the wear and tear, if the tenants are taking good care of things. If something’s broken or something will break or is breaking, you should have all those notes. So it’s not just walking in the home and looking at things with your own two eyes. It’s about creating a report so that someone else who didn’t do the report, if they were to go look at it, they would know with 100% accuracy the exact condition of every room in the entire home.

That is really the goal of an inspection report, and you do that through taking a photo of every room, making a note of anything in every room, and making a note of the age of the appliances if they’re there or if you don’t have previous record of them, and also making notes about how the tenant is behaving in those rooms or how you think they’re behaving. So if you notice there are, let’s say dog marks on the floor from cause or whatever, you could tell that there had been a dog there, the tenant has an unregistered animal or did have an unregistered animal living there and you’ll be able to understand that they are doing damage to these floors and as a result are going to be liable to them and that you might have to replace them sooner than you expected. So really it’s about commenting on the exact unobjective condition that every single room in the property is at the moment of the inspection. This includes using every appliance. So when you go through, you want to make sure the appliances work yourself. You don’t want to just trust the tenants word even though they may not be lying about it at all. You want to see it unobjectively. You want to be able to make note of it in your report and you cannot with 100% certainty put on the report that something is working unless you saw it working yourself. So you want to test hot water, cold water on all the sinks. You want to make sure there’s no leaks under the sinks. You want to open up every cabinet to make sure that all the cabinets are working, that everything’s in working order. And also you’ll catch things the tenants may or may not be trying to hide by going in every closet by going into the crawl spaces as well to check for mold or to check for water accumulation so you’ll be able to catch anything a tenant would or would not be doing if you open up every single closet, every single door, every single cabinet, every nook and cranny you should really be looking at.

And then it should be noted in your report if there is anything of significance there. And so really that’s the service you provide to an owner. Your owner may live, let’s say in California, but if you have a report that is that detailed, they can wake up, they can look at their email, they can look at that report and they can with 100% accuracy, know the exact condition that their asset is in right then and there. They don’t have to come and fly out, let’s say Delaware, to see their property because you provided them with such an accurate report that they know the condition of their home and that’s really what an inspection should be able to do. If you can’t do that with your inspection, then your inspection’s probably is not good enough, not accurate enough and not detailed enough in order to be of use or as much use as possible in the future.

Jaime: So as you can see, a good quality inspection is not what I call it drive by. Where there’s a high percentage of landlords who are managing their own properties, where if they do inspections then they will simply do just the drive by, which is just as Connor said, open the door, walk around quick, boom, and then they’re out and they’re done. A good inspection creates a track record. So imagine that you have a property and you’ve had the property for 10 years. And imagine if every year at a minimum you had a detailed inspection report with pictures on your property. Well now you have an accurate representation of what’s going on with your property, how it’s aging, recurrent problems. If there’s ever an insurance issue, you have years of documentation, before pictures that you can then combine with after pictures.

You can get ahead of maintenance costs. So in the industry would call them cap ex costs, where you’ll have a pretty good idea over time of when your water heater potentially is likely going to fail. And as a result, you need to plan for that or when you’re going to need to put a roof on the property per se or when you’re going to need to put new carpet in this particular area of the house. So there’s so many advantages to doing a detailed inspection report and, you know, sometimes we’re asked, can I just hire you guys to just do my annual inspections? At this point, the answer to that is no, we’re really interested in just being wealth creation partners with the owners that we work with. We’re not really juiced up about just doing one off inspections for owners.

Will that change in the future? Maybe but we don’t have any plans to change that. So if you’re an owner and you’re managing your own property, this is a really important episode today to really show you the importance of doing a great inspection report. Any last thoughts you want to add before we wrap up?

Connor: Yeah. One thing, sometimes we hear from some owners that they don’t want to do an inspection of that caliber, of that depth because it might be obtrusive to the tenant. I’d argue that is not a good reason to not do this inspection especially if you’re the homeowner as well. You really need all that information and if you give the tenant proper notice, they’ll have ample time to prepare. When we sign a lease with a tenant, we let them know that the month or the month before, we’ll send them the releasing package. We’ll be at their property with them doing the inspection while they’re there next to us watching us do it and listening to any notes that we make.

And it’s really not intrusive in the sense that we give them all the notice and we let them know that, hey, this is the depth of searching that we’re going to go into. We want to make sure that every little nook and cranny is up to specs and is working in good order. Some people think that’s intrusive and as a result, they don’t want to put that on their tenants, but we view it the other way. If a tenant wanted to live in our home and help us build the wealth of the owner as well, they would have no problem doing that at a rate of once a year, working with us so that we can know and that actually helps us provide a better service to the tenant. So instead of a tenant missing hot water for two or three days, we can just replace the hot water beforehand and let the owner know, hey, your hot water heater’s going to break, it’s leaking out of the bottom or there’s rust accumulation at the top, which is a sign that’s going to go at any moment and just replace it before it becomes an issue. So it’s actually a benefit to the tenants because we’re able to catch all of these maintenance issues before they become an actual issue that needs to get resolved. And as a result, maybe they’re out with hot water or the heater breaks or the AC breaks or something like that and lowers their quality of living for a little bit there and becomes a stressor. So we can actually eliminate all that if we do the inspection properly. And we’re going to need their help with that at the end of the day.

Jaime: I know sometimes landlords feel a little creepy like, what are you saying that I should actually go and look in all the closets of my tenants, my tenants a place? And the answer to that is yes because remember that you want to run your rental property like a business. It’s not about being intrusive or not intrusive or creepy or not creepy. It’s a business transaction where you are simply, as a business person, protecting the value of your asset. And so we encourage you to look at it that way and then just remove any emotionality out of it. Alright, well, a very important episode. We appreciate you joining us for this episode of the Landlords Resource and we look forward to seeing you next time.