Water – a property investor’s greatest natural foe
Any investment in real estate – be it residential or commercial, will always have water as the main, natural element’s source of agita for property owners. Can you mitigate water problems? Absolutely. However, whether you can retain a positive cash flow in your property or not may hinge upon several key factors when dealing with water-related issues. Here are several important points to remember before you proverbially die from water torture.
Before you buy
You must have your potential investment property inspected by a licensed house inspector, or commercial building inspector. They can suss out any potential water problems associated with high water tables in the area, poorly graded building siting, underground streams and the ever-popular cracked foundations. Sometimes existing water or mold issues can be easily fixed. For example, an unmaintained building may have damaged or non-existent gutters and leaders. Hence, rainwater is dropped right next to foundations, and in heavy rains, there will usually be some form of basement seepage. This can then translate into standing basement water problems and/or mold growth – which of course, can spread. The solution – repair or replace existing gutters and leaders where needed, thereby stopping the problem from re-occurring.
In addition, make sure the area around the building is properly graded to allow for rainwater to escape away from the foundation walls. Simply sealing foundation cracks is usually not enough. The perimeter grading is what is all-important. Your inspector will also be able to tell if any underground streams and/or a high water table will require you to install an interior French drain system in the basement, complete with sump pump and outflow pipe considerably far enough away from the building.
Mitigating water problem costs known before you buy can easily be figured into your offer price on any potential acquisition. This type of water issue, while a bummer when you first buy the property, does not cause the kind of heartburn that the following problems most certainly will…
Emergency water problems
Here’s where things get icky. Any burst pipe will cause your tenant to call you – at any hour of the day or night, naturally. So you better have your emergency plumber (or two) lined up to call after you hang up with your frantic tenant. A plumber you can trust to get right out to your building and handle the bleeding, as it were, immediately. Sure, you’ll be paying double-rate for an emergency call – but think of the damage a burst pipe can do to your building. The worst-case scenario with a burst pipe, is when you don’t have a tenant in place to call you. (If a tree falls in the woods, did it make a sound?) Walking in on a flood as a property investor is one of the worst feelings you can have…So to hopefully avoid this, conduct regular inspections of your building(s), looking for potential water and or/pipe problems. Especially if you know you have any older, or rusting pipes. Maybe it would be best to replace them with pex (plastic) piping now to avoid any major problems later.
Train your tenants
Next to a burst pipe that produces an immediate emergency, the greatest water problem that can ruin your profitable investment property and turn it into a financial disaster, is the slow leak. The leak that’s never reported by your tenant. The tenant with the long-term lease. The one who will “just live with” the minor annoyance of a small drip emanating from the base of the toilet, or under the kitchen sink, or behind the refrigerator. The leak you won’t notice until they move out, and you discover a warped floor, damaged carpet, or ceiling stains from above. Or worse – if you discover mold that’s been growing for quite a long time – requiring you to remove entire walls or ceilings, and completely replace them with new sheetrock, as well as painting them.
Don’t put yourself in this position. Always do regular maintenance “visits” into your tenants’ units. Train them to call you immediately – if not sooner – when they discover the first drip out of anything in the unit! Then call your trusty plumber to make the necessary repairs. You’ve budgeted for repairs and maintenance as part of your cash flow analysis – make sure you follow through and get your tenants to alert you to the smallest of problems as quickly as possible. In this way, you can avoid the much greater hassles in dealing with any growing water issues, and the overall monetary damage they can truly represent.
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