Don't forget about rental codes and deferred maintenance.

I've been spending some time today going over the frustrating visit of a multifamily unit I checked out. I was very excited about seeing this property. It didn't need much in repairs and the seller was sounding very motivated. Unfortunately, the repairs are much more than I anticipated. It was also very clear that much of the repairs were due to deferred maintenance and that getting everything up to rental code was going to be much more laborious than I had anticipated. After mulling it over and deciding that rather than simply complaining about it and being angry/frustrated I would sit down and explain to others how important it is not to defer maintenance and not to ignore the ever dreaded rental codes.

I arrived early to see the property to spend some time inspecting the outside of the property. Using J Scott's "The Book On Estimating Rehab Costs" I used the SOW (scope of work) lay out to plan my inspection at the property. It was very well laid out and gave me the frame work of what to look for as I'm inspecting the outside. It started from the top down; roof, soffit/facia, siding, windows and doors, foundation, electrical connections, lawn, etc. From just my outside preliminary inspection I was seeing plenty of concerns.

The roof had some damage to the T-lock Shingles, including one that was hanging off a corner of the house. For those of you who may not know T-lock shingles have been discontinued since 04-05 due to lowered manufacturing criteria. As prices increased for the raw materials to make the shingles, corners were cut and the quality went down. Since then these 'thunderstorm' shingles (known to withstand the forces of high wind storms) have not been as cost effective nor have their served their intended purpose as well. Knowing the roof needs repair, and hasn't seen it for years and that T-locks are no longer manufactured its clear that its safer to go with a full replacement on the roof.

Further inspection, where the soffit and facia was missing, revealed the state of the sheathing underneath. Highly damaged by the water and neglected over years the sheathing was bowed and facing rot. It was hard to tell but the roof truss didn't look so hot either. The 8"+ ice damn on one side of the roof didn't help build any confidence in the condition of the roof.

I was noticing other signs of deferred maintenance and some issues that were bringing into question whether things might pass code inspection. Some of the problems included second story windows that were damaged, insulation on the foundation was missing or damaged, windows and doors needed paint touched up and it wasn't until I was inside that I was informed the windows are painted closed. Things were just going more and more down hill. What was most frustrating was that these things were things that could have been highly avoided had some repairs been made.

Once I got inside I quit taking notes because the extent of repairs were well beyond what I had been informed of. We went upstairs first. Okay, no big deal, it was previously rented by a tenant with multiple pets who didn't clean up things. It should be a simple replace the carpet paint the walls and address some cleaning. Then I go to the bathroom...

DUN DUN DUN!!!!

This bathroom... oh this bathroom. (insert dramatic pause) I could see the lower unit through the floor in this bathroom. It had sustained major water damaged and required the the floor to be replaced and at least 3 walls to be remedied of their rotted wood. On a positive note the lack fixtures in the room really helped make it feel more open as well.

At this point the house is just one problem after another. Unfortunately, much of this has been caused by deferred maintenance. Had the bathroom had a vent fan (let alone a window) and properly maintained plumbing this wouldn't be the total mess it is. Along with the broken and non-functioning windows now I'm looking at replacement of all windows in the entire property. And previous to this is just the roof.

Now that I'm done describing the condition of the property I can finally get to the point of my post. The biggest thing I took away from this visit was the condition a property can end up in when maintenance is deferred. Those costs just add up and up until you're stuck with a money pit. And all the while this owner has been deferring this bigger costs, the little things that are related to code enforcement also went out the window.

I've ended up in a number of rentals that I've rented in where the property is not up to the city code enforcements. One did have all the windows painted closed, which did legitimately scare me, and a more recent rental has some interesting solutions to humidity in the bathroom. What I don't understand is how these properties pass their inspections and how new buyers might assess these concerns. Every year a property is supposed to have a rental inspection (yeah right) so I'm not sure how all these pass - ESPECIALLY this property. My only guess is that the owner just eats the fines and its a cost of doing business.

As I've run the number on the sample property from today I have had to really adjust for the deferred maintenance and the cost to get things up to code. Now I'm sure there is some getting around some of the codes and a little 'sure I'll get around to it this week' on minimal things, but the amount really ads up. Unfortunately for the seller, these costs have really eaten into anything left in the property. Between the roof replacement, window replacement, cleaning the units, fixing the bathroom, and everything else the offer price I would propose on this property is in a different league than the seller is asking. I'll still put on in though.

I guess what I hope all your landlords reading this get from this post is that there is some extreme importance when it comes to maintaining your property. Don't find yourself in a similar situation where when you try to sell 5, 10 or more years down the road that you have now lost any profit because you're going to lose too much from the problems that will need to be fixed. In other words, DON'T DEFER YOUR MAINTENANCE! Its not worth it to your buyer, whenever that may be, and there fore its not worth it to you.