Property Selection – Watch Out For Big Ticket Items

Submitted by Curt Amesbury Okay – so we have an idea of the area and the type of property you want to invest it. If you have options to use cash vs. leverage, remember that cash is king! Since we are not accumulating wealth by appreciation, using cash can drive the best and fastest deal from the buyer’s perspective (you can always refinance after the fact to reduce your exposure). In either case, you will want to be conscious of items that can cost you big bucks now of in the future…such as:

The Roof

The age and condition of the roof surface are important, but what is underneath? Is the original roof made of cedar shake shingles? If so, IT HAS TO GO SOMEDAY! You don’t want to incur the cost of tear-off and plywood installation unless you factor that into your numbers! Does it have a flat roof? If so, be very careful! Rochester’s climate is hard on flat roofs.

Electric Service

If the meter is inside IT HAS TO GO OUTSIDE SOMEDAY! A ballpark estimate is $1200 per 100 AMP service (if you own a multi-family multiply $1200 times the number of units). (Incidentally, if you are moving meters outside have a separate meter box for each service – if someone tampers with a meter you won’t jeopardize the whole building!). Also, upgrading electric or restoring shut off service means bringing the electric box AND electric grounding up to today’s code (electrical certification required)! It’s not uncommon to spend $800 in-ground rods etc.

Water Service

Is the main water line coming into the building a galvanized pipe? If so, IT HAS TO BE REPLACED SOMEDAY!

Sewer Line

Is the main sewer going to the street in good condition? A camera inspection is well worth the $150 a licensed plumber will charge. (One investor I work with owns his own fiber optic cable, so he can investigate sewer lines himself!)