The Importance of a Commercial Building Inspection Report
Feb 20, 2018 // By:Scott Hamele // 3 comments
Nationwide Commercial Inspections Customizes Reports for Each Type of Real Estate
The most important thing to a real estate investor is the profitability of a property. That being said, the investor typically concentrates on the cash flow of the property which includes debt services, rental income and utilities among other things. During the buyer’s due diligence, what is normally overlooked is the detailed condition of the property which is a major mistake when buying a commercial building. These same mistakes are made during the pre-lease due diligence for tenants. Take advantage of a commercial building inspection report and understand what it means.
A Property Condition Assessment (PCA) will include a list of items and costs associated with needed improvements and repairs. Our PCAs categorize future building expenses into three categories which can be used as short- and long-term cash flow strategy.
Three Types of Building Deficiencies Listed in a Commercial Building Inspection Report
Level 1 – Imminent
Imminent repairs and improvements are those that affect the life safety and short-term risk of the building. Items such as fire alarm devices, emergency exit lights and signs, broken railings, unsafe electrical circuits, non-operable HVAC systems, improper HVAC and hot water heater venting, and structural, roof and plumbing leaks. Any of these items listed have immediate adverse effects on the integrity of the building as well as the safety for occupants.
Level 2 – Short Term
Any damaged or faulty building components that will diminish the integrity of the building, but do not pose an imminent risk to the life safety and overall integrity of the building, are improvements that should be made in the near future within 3-12 months. These are things such as bad window joint sealants, damaged gutters, no hot water, railings and grab bars that are not to code, roofs with less than one year of life, degraded exterior moisture protection (EIFS, stucco, etc), non-grounded outlets, etc. Parking lot crack sealants and pot hole repairs are items that should be dealt with within the first year, as these will degrade the overall condition of the parking lot and lead to full surface replacement.
Level 3 – Long Term
The category of long term is really a matter of opinion by the owner. However, a long-term strategy needs to be adopted that encompasses 1-10 years. The building envelope is the most important and a maintenance agreement is advised with subcontractors to properly maintain the roof, joint sealants and exterior skin such as masonry sealants, tuck painting, EIFS and stucco repairs, etc. A fund should be established to begin saving for eventual long term improvements such as a roof replacement. Special consideration should be made for site elements such as landscaping, retaining walls, irrigation systems, and the parking lot and lighting.
Don’t have buyer’s remorse and realize after the closing that you now have hundreds of thousands of dollars worth of improvements you need to make over the next five years that will destroy your cash flow and capitalization rate. A commercial building inspection report is a value-added service all bankers, tenants and commercial real estate brokers should consider. Be considered as one of the top in your industry and a savvy tenant. This value-added benefit only solidifies yourself as a trend leader.
Nationwide Commercial Inspections, LLC (NCI) provides the most comprehensive commercial building inspection Reports in the industry.
NCI utilizes their architectural, engineering and construction expertise to create and develop a high-quality PCA. These reports are customized for each type of real estate: office, retail, flex-space, industrial, hospitality and healthcare. If you are interested in protecting your real estate investment, contact us at 913-667-7774 or visit our website at www.nwc-i.com.
Click here for a VIDEO about the Property Condition Assessments we provide.