Benefits of Property Improvement Evaluations/Estimates when assessing a property for purchase
When performing any sort property improvement evaluation or estimate, our goal is to let the owner know the true state of the property. Visiting the site and strategically working through the building allows the consultant to provide a holistic perspective on the value of a property.
With potential issues identified, it is easier to prioritize what the immediate needs are as not all items carry the same importance or urgency. There may high level urgent issues such as a roof leak or lack of hot water that could affect the longevity of a property and guest comfort. Issues such as these may impact a property’s revenue because not only will guests not stay at the property, but they may go as far as to leave a negative review about their experience.
An evaluation will help an owner determine what expenses need to be made during what timeframe in order to address all of the needs. Transparent conversations allow the owner to make informed decisions about the property. By having a complete understanding of the property’s existing conditions, they are able to appropriately prepare their budgets to reach their goals.
TCC was recently approached to evaluate a historic building in need of a renovation. The organization that owned the property had previously hired another firm to perform an assessment; the report that was provided identified some high-level issues, but did not give any real insight into priorities, costs or potential timelines. TCC was asked to perform a more thorough investigation and as a result, the organization was provided with an in-depth evaluation including a list of recommendations, which suggested that they approach the project from a very different angle.
Many owners have opted to avoid the expense of doing an evaluation. As a result, the value of the property is often either over or under-stated. A buyer could easily purchase a property with the impression that it is at a certain level, but without a complete understanding of what underlying conditions may exist, the owner could end up having to spend 100’s of thousands of dollars in repairs that a comprehensive inspection would have revealed.
From the financial perspective when a property is at brand standard, it can usually be sold at a premium. Normal hotel operations will provide a return on investment (ROI) for the purchaser. However, if the purchaser underestimates what will be required to bring the property up to brand standard, the ROI can be much lower, which could mean that property would be operating in the negative. Not only does a lower ROI affect day-to-day finances, it also makes it much more difficult to refinance a property or obtain any additional funding.
Another property that TCC evaluated had underlying mold issues. All typical sources of mold and water penetrations were explored but nothing could justify the extent of the damage. It was revealed that even though it wasn’t noticeable to the untrained eye, there was a water problem that may have been caused by runoff from a nearby building within the same area. As a result of the water problem, it was determined that the building was sinking and needed to be torn down rather than renovated. TCC advised their clients of the issue before they invested any further resources into the property.
As demonstrated in this instance, mold problems are not always disclosed. Sometimes evidence of these problems only exist – or don’t exist – in maintenance logs. Maintenance logs will help an owner as well as a buyer understand how well the property is maintained. Reviewing and evaluating these logs as well as performing regular inspections provide an even greater depth of understanding of the true value of a property. Questions to be asked should include:
- How often are the mechanical, plumbing, and electrical systems being serviced?
- When are the shutoff valves being exercised?
- Have any mold or other problems have been addressed?
At the end of the day, performing a property inspection or a property improvement evaluation benefits everyone.
- The buyer that needs to have some basis for the best purchase price. A property could easily be overvalued if there are underlying issues.
- The seller who wants to get the highest dollar for their property. No one wants to leave money on the table.
- The owner who is self-funding repairs or property improvements. They need to know how much to invest into the property over what time frame to maximize their budget and minimize any disruptions to operations.
About Triple Crown Construction:
Founded in 1991, Triple Crown Construction built a reputation for itself as a reliable partner in the hospitality and commercial construction industry by understanding and delivering on its partners’ expectations. Based in Frederick, Maryland, Triple Crown Construction strives to approach each and every project with the goal to deliver quality, service, and value, and is committed to raising the standard of excellence in all areas of its work. The company operates with a family mentality, a commitment to the greater community, and a desire to work with those who aim to improve their customers’ experience.