Congratulations, you closed escrow on a multifamily apartment building.
Pat yourself on the back. During escrow, in accordance with prudent real estate investing practice, you did your due diligence. You walked through each apartment unit, had the building inspected for everything from pest and dry rot to electrical, and generally surmised that the rental property would be a good income producer and real estate investment opportunity.
Okay, fast-forward a couple of years.
Since your purchase, you essentially sat back and collected the rent without making any provision to inspect the units periodically. As long as the units were occupied with good-paying tenants, you were satisfied to remain aloof and out of their kitchens.
Now, after several number-crunching sessions with your accountant, you made the decision to exchange your real estate investment for a newer, larger apartment complex. You listed your apartment building for sale with a popular real estate agent who understands income-producing property, and to your delight, within just two weeks you get an offer, accept it, and set up a time for the buyer to walk through and inspect the interiors of each unit.
Here's where it gets ugly.
During your walk-through, you are surprised to discover that some of your tenants had little regard to maintain your property. Though careful to make their rent payments on a consistent basis, you see a stack of tires in one unit, multiple bleach marks on the carpet of another, one unit painted totally pink, and one bathroom floor bulging like a cupcake.
The result is not pretty. When the inspection is over, the buyer terminates the offer and goes away. Or more insulting, he tries to renegotiate the deal and beat you down on your price.
This does happen. I've seen it happen. And why it happens is obvious.
Some real estate investors get lulled to sleep by tenants who pay their rent on time, are not disruptive, and generally keep under the radar. With no red flags waving, some landlords simply feel no need to inspect the units periodically and then suffer the consequences.
So, it's time to wake up and take care of business. Prudent real estate investing requires you to know what's going on behind the closed doors of your apartment building. Regardless how good the tenants appear, schedule a walk through of every unit perhaps twice, but no less than once a year.
Hey, it might not prevent everything tenants have been known to do, but it will surely help.
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