I’m often asked by colleagues what I look for when I’m evaluating a building I think I might want to acquire. They know I’m keen on having good procedures in place to keep things running smoothly. I’m also a big fan of The Checklist Manifesto by Atul Gawande. As a guy who deals in complexity, I need all the help I can get to keep things simple, and a checklist can help one stay focused and accomplish amazing things in a chaotic world.
So, of course I have a checklist of things that I look for, some objective and some subjective, when I’m thinking about buying a property.
I can usually tell within five minutes of being within a building if I’m going to buy it. However, I still refer to my list of things to confirm before making my final decision. I also use this list when I’m looking to put a building on the market because it helps me figure out the best story to tell about that asset.
Here is some of what’s on my list when I am walking into the door of an asset I’m considering buying or selling:
- Common or unique
Property type, and whether it is common or unique, will influence my interest. A common rear-load distribution building may boost a building to be Class A, while a unique building that has fewer, specialty uses, say a building that housed a giant printing press, will be viewed as a lower class asset.
- Green goo
No joke with this. I’ve looked seriously when touring sites for evidence of green dew, and oozing green goo. What environmental clean up might be required?
- Tenant credit worthiness
This is a big one. Creditworthy tenants can do a lot for a building’s value. Tenants are also something to look at when touring the property. What’s the quality of the businesses paying for space? It matters.
- Property class
Age influences a property’s class – the older a building, the more likely it is to be a Class B or Class C. Location also influences class. If it’s near Charlotte, it’s has a higher chance of being Class A. Pikeville, N.C. and you are more likely to be Class C.
- Management requirements
I like buildings with low management needs. Higher management needs tend to push a building to Class C.
- Market rents and lease lengths
Class A buildings typically have rents above market rate and longer leases in place.
- Smell
Does the building smell like mildew? I’ve been in buildings that could have been Class A buildings that were used for tire storage. That’s a smell you can’t ever get out, and that building will forever be a Class B building because of those tires.
- Signs of water leaks
I can’t tell you how many times where I’ve seen calcification on a floor and water stains on a wall showing where water has leaked from leaky pipes and holes in the roof.
- Dirty vents
Dirty vents suggest the mechanical system has not been maintained.
- Dead bugs
I actually like to see dead bugs. Dead bugs are a good sign. They indicate there has been pest control and the exterminator has been there.
The cleanliness of a site can tell you a lot. Are there cigarette butts everywhere? Is irrigation working properly? Do the plants look good and are the windows clean? Smoky Bissell did a phenomenal job with the details of property management. His buildings were always spotless, and you could tell he took his job very seriously.
Often property with unmowed grass, unsightly litter and dirty windows suggests an out-of-state investor owns the property and a lack of a local property management presence. This means you’ll need to pay closer attention to the details before making an offer.
Because if they aren’t taking care of the trash, what else are they ignoring?
If you are having a hard time selling a building and suspect it may be because of some of these issues, schedule a time for us to talk about the building and how to best position it in the market. We have a tool that takes into account potential problem issues that we know to look for and advises on how to best position and then package that asset for the market. Give us a call to talk about what we can do. We love challenging assets, with and without the dead bugs.
