Guest Speaker: Keith Mathias
Property Due Diligence and Inspections
Keith Mathias is the National Accounts Manager for AmeriSpec Inspection Services, which provides expert evaluation for any residential or commercial property inspection. As the leading home inspection brand, tested and proven for 30+ years, the company delivers complete peace of mind to buyers and sellers of homes and other properties. Their coast-to-coast network includes 400+ highly trained, experienced inspectors with more than 80 hours of classroom, in-field and hands-on technical training. AmeriSpec evaluates properties on 400+ points to provide detailed condition assessment. Prior to joining AmeriSpec, Keith served as Director to Franchise Recruiting for Pillar to Post Home Inspector and was Director of Strategic Market/Franchise Development/WIN for America (Veteran’s Program) for WIN Home Inspection. For ten years, he also owned Mid-South Stone Masons, Inc., which specialized in stone and hardscape products and installation on both residential and commercial projects.
What you’ll learn in this episode:
*AmeriSpec is over 30 years old and started in California. Today it is based in Memphis and part of the service master family of brands. The company originally focused on residential properties before expanding into commercial properties. It provides a nationwide solution for people looking for inspections. They have partnered with independent inspection companies (Quality Service Providers – QSP) to give them a larger capacity for taking care of projects with multiple properties across multiple states.
*Keith defines a property inspection as a “top to bottom inspection” that includes over 400 different items from the roof to the foundation. It would handle major points of exposure, including air conditioning, heating, plumbing and electrical systems. It’s important to understand the condition they are in. Then there are the cosmetic parts of the home. With an eye towards overall safety, the inspector’s job is to call out items that need further investigation.
*The “big ticket items” are the roof, the electrical systems, plumbing and HVAC. Depending on the area of the property, soils and cracking foundations may also be a large issue.
*Keith says that often, inspectors are able to determine the age of the water heater, electrical panels and HVAC systems, which have a normal useful life of 10 to 15 years. If you’re buying a property in year ten, it’s reasonable to assume you may be replacing that equipment soon.
*One of the biggest potential headaches for new investors is deferred maintenance items that don’t immediately stand out as a problem. The value of the inspector is that he’s trained to pinpoint those items that might not be apparent to the layperson. An example of “deferred maintenance” is that fascia board on the front of a house that looks like paint’s blistered on it. It’s a larger fix than might be immediately apparent. Those things will add to the expense of preparing a house to lease or flip.
*On smaller commercial properties, inspection is a similar process whether the owner lives on the premises or rents it out (even with tenants coming and going).
*Not catching plumbing issues during an inspection is, according to Keith, a “big oops.” Depending on where the property is and the quality of the water, pipes can spring holes. He lives in Tennessee in an area that is notorious for copper pipe getting pinholes in it over time. Generally, if the home is 40 years or older, a sewer scope is a good investment for a few hundred dollars. For newer homes with fewer trees around them, it’s not as important as older areas with more trees and shrubs.
*Depending on the roof system, Keith says you can probably count on 30-year dimensional shingles to last a long time. The technology on the shingles has come a long a way and the 15 to 30-year products are performing well. It’s also important to see how the HVAC equipment is mounted on the roof.
*Asked about inspecting a prototypical fourplex, Keith says they would measure the exterior of the whole building as a single unit. They inspect the interior apartment by apartment. He estimates that it would take an inspector 15-20 minutes on each interior, then another 2-3 hours for the outside of the building.
*AmeriSpec has a “call repair pricer” whose job it is to estimate the cost of a general rehab to fix flawed items and large issue that need deferred maintenance. It usually takes 24 hours from the time of the inspection to prepare this. Generally, Keith says, you’re looking at $7,500 to have that added on in the inspection report. The pricing is all data based on the local area.
*Most inspectors will base their fees off the square footage because it’s easy to understand. But it’s a time situation. A fourplex in the Memphis market would cost $750-800 for a full inspection. It would probably take two inspectors the better part of a day to do it.
*The buyer is able to walk side by side with the inspectors, who, Keith says, “enjoy taking time out as they’re going around the home to point out where the hose bibs are and where the water main shut off is. They can give that person a sense of how the home operates and what they need to keep an eye on from a maintenance standpoint.
*AmeriSpec usually has their reports finished the same day they do the inspection. It can be communicated electronically or via hard copy. If the buyer needs a repair pricing estimate, that will take an additional 24 hours. You’ll get the “summary section” where the inspector will consolidate all the issues he feels are important for you and the seller to know about. There is also a “general section” which has a more detailed description of what they’ve seen during their “inspection walk” of the property.
*The training available to inspectors today is light years ahead of what it was 10-15 years ago. Great educational support materials and modern technology have changed the inspection business for the better. In the old days, the inspector would carry a clipboard with carbon sheets for handwritten copies. He’d do his report at a typewriter. Now, everything is done via a handheld device that allows him to enter the data as he walks through the home. He can put a report out immediately, which translates to huge labor savings. Modern technology, Keith adds, also allows buyers and sellers to have much more data to work with. Lenders and insurance companies, for instance, have more information at their disposal today.
*In looking for a good inspector, Keith says you should look for someone with experience and training, who carries proper general liability insurance in case of human error and accidental omissions in the report. Insurance is in place to protect the inspector and buyer/seller. “Old school” promptness, courtesy, cleanliness and meticulous care are other important qualities. It’s probably best to seek recommendations from your real estate agent or use Google to find potential inspectors with high ratings.
*AmeriSpec does inspections of small to medium size commercial properties. They also have teams of inspectors that will go out on larger projects that are over three stories – and also commercial properties beyond the small apartment realm like strip malls. The company is currently engaging in a renewed focus on multi-family and student housing.
*Keith discusses another important service called Cap X, which is part of the property inspection.
*Commercial inspections generally cost between 12 to 18 cents per square foot.
*Keith’s final advice: “Don’t skimp on this opportunity to go in ahead of the purchase and get to know that property. Probably the average home inspection would be $375-425 across the country. Which is low compared to what we’re putting at risk by not doing the inspection. My advice is to do a good job with due diligence and save yourself the trouble and expense down the road.”
Resources:
Grab a FREE Copy of Lance’s Best Selling Book “How to Make Big Money in Small Apartments” Here.