Using a Commercial Real Estate Inspector to Improve Future Purchases
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Commercial real estate is one of the fastest-growing sectors of real estate. While Congress is still mulling over infrastructure investments, local CRE listings are growing at an increased rate. Simply put, the market is speaking: people want to get back to work, go back to shopping, and enjoy their entertainment districts.
As investors, our job is to maximize all available opportunities. To do that, you will need to not only look at the listings available but you need to examine them carefully before putting in an offer. You might not always tour a property before putting in an offer, but getting an inspector is a great idea for open properties.
It is often tempting to skip over hiring professional help, especially when just starting in real estate. However, the professionals that become part of your team only make you a better investor because no one can know everything about every single aspect of the real estate investing business. You pick up new skills with every purchase and managing your portfolio only grows more complicated over time.
Navigating the Complexities of CRE Listings
Even if you cannot view the property right away, that does not mean that you cannot do your due diligence. Pull up the address of the listing in Google Maps and check out the Street View option. What is the area like?
The seller will allow for inspections as you get closer to putting a serious offer on the table. This is where you come in with your inspector. Having someone who is working for you is much better than simply relying on the information provided by the seller. While most sellers are indeed aboveboard, even the most diligent seller cannot inspect everything before you get to the property.
An inspector has spent a great deal of time on training and real-world applications of those skills.
What a Commercial Real Estate Inspector Can Do for You
While it’s true that the seller often has an inspection report of their own, there are benefits to having your own inspector:
- Independence. If you have your own inspector, they are working for you, and their report is yours to review.
- Thorough. Your own inspector may catch things that the inspector used by the seller missed.
- Timely. The more information you collect on your own, the more likely it is that your upcoming purchase is truly an investment.
- Third-party confidence is restored. Keep in mind that a commercial real estate inspector brings their expert experience to the table. If later issues arise and you have to go to court, the findings of the inspector are often admitted as evidence.
Better information leads to making a better offer, but it also lets you calculate your budget better. For example, if the inspector lets you know that there are issues with the property, you can either change your offer to adjust for the repairs, or you can ask for other concessions.
Tips on Hiring a CRE Inspector
If you are going to hire a CRE inspector, there are a few things to keep in mind:
- Ask for references. A good inspector is based on their work with previous clients. They will be able to give you references that you can follow up with to discuss the inspector’s qualifications.
- Check for certifications. An inspector that’s part of the American Society of Home Inspectors is a great start. You may also have an inspector that’s part of the International Association of Certified Home Inspectors (InterNACHI).
- Don’t forget to look for state and local registrations as well. An inspector should also be abiding by the rules of their state, including carrying proper insurance and following local regulations to the letter.
Before you set up an agreement with an inspector, make sure that you are asking plenty of questions. This is not only normal but very much expected as part of doing your own research. In fact, only an inspector with an unsavory reputation will be surprised that you want to get more information.
Even though the focus in the industry is on home inspections, InterNACHI does offer a commercial real estate inspection option to its members.
Setting Up Your First Agreement with an Inspector
Generally speaking, most inspectors work from job to job and project to project. So their fees are based on the project you present to them. However, that is not the only way to set up an agreement with an inspector. You can also decide to set up a retainer agreement where they can be on call for multiple projects at a time.
Retainer agreements are a little trickier, but they do serve as a win-win between you and the commercial real estate inspector. They will get a guarantee of knowledge that work is coming ahead of time, and you have access to their time. This is good for investors that will be purchasing multiple properties in the upcoming year.
If you know that you don’t purchase that many properties, hiring them by the project is a perfectly great place to start. As your real estate investment portfolio scales outward, you will find that getting an inspector on your side at the beginning helps you make smarter buying decisions over time.
Managing Expectations for Your Inspector
The inspector you ultimately hire has one job: to inspect the property that you specify. They will not only walk the property and look over it thoroughly, but they will generate a report for you to review at your convenience. It is important to take this report seriously and look over it carefully.
Every inspector’s report will be slightly different, but it should be giving you an overview of the property as well as any areas in need of repair. The inspector can’t give you visual suggestions of what to do with the property; that’s your job. However, they can help identify key areas that need repair.
Even when the transaction includes an inspection report from the seller, you can’t go wrong with your own inspector. Having someone on your side that you can trust and know that they will examine the property is a great way to strengthen the quality of properties in your portfolio. While the inspector can’t tell you whether to buy something or not, you’ll have much more information than if you simply went in based on that of the seller.
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