Business owners tend to be some of the most intelligent minds in America but it never ceases to amaze me how few of them get inspections on their property. One thing I’ve learned managing my own inspection firm is that you should always ALWAYS contract out the work you are not an expert in. It wastes more time and money when you try to do it yourself and it is always a benefit to have a professional do it for you.
As a business owner you would never do your own taxes or legal work and generally we try to hire out our marketing, when we can see a direct benefit. I have enough mechanical knowledge to take my truck apart and put it back together again, but when it comes time to do repairs I pay a professional because my time is better used elsewhere. The care of your largest asset should be no different, and it is even more important to inspect it right using a licensed organization.
Two things we can discuss in todays post, 1st is whether you need an inspection (you do) and what will be included in that inspection, 2nd is whether you should be on a maintenance program.
If you're buying a commercial warehouse, a commercial kitchen, income properties or virtually any property that can (or should) be purchased under the veil of a corporation you need to have an inspection done. It removes liability from you in the event that an employee or visitor is injured due to a fault in the property. Imagine the lawsuit you open yourself up to (and even just the loss in wages and workmans comp claim if no suit entrails) in the event that someone is injured walking on a broken mezzanine. Why didn't you have it inspected Mr. Business owner? Said the judge.
Second, do you know how to check, water lines? what about pressure checking gas lines? or evaluating a 440 volt 3 phase electrical panel? Or measuring output of an HVAC system? A lot of DIYers (which a large percentage of business owners seem to be) have walked around with an inspector and thought they could do the same job when purchasing a residential home, the reason they have this misconception is because what they see and what actually is going on are separate things.
When the inspector turns on the bedroom light he's not just testing the light switch and the fixture, he's mapped out the circuitry in his head so he has a better idea what to look at in the panel, he's checking the ceiling for water stains and evidence of asbestos, lead and Chinese drywall, when he tests your outlet he's load testing the entire circuit, when he opens the windows he's checking for caulking and broken seals in the window. Much more is actually going in to each step then you are seeing and the same (with much more severe consequences) holds true with your commercial property.
When you look at your commercial property you might be spending $200,000 or $1,000,000 everyones budget is different but the percentage of effect is similar it is the single largest asset your company will likely ever purchase. Knowing the issues before hand can assist you in lowering your price for negotiation, have repairs done before establishing, and even make the sellers pay them. It can also tell you if this is a property you need to walk away from. Imagine a commercial HVAC system, they can literally cost $100,000 or more and repairs can be astronomical, doesn't it make sense to throw a couple hundred bucks towards a specialist to check it out?
We all know it’s stupid to perform your own legal work and this can be potentially more costly. I used to work for a roofing company that specializes in commercial roofing, do you have any idea how much a commercial roof costs?! Labor alone is out of this world because they have to compete with Davis Bacon wages on the government buildings. Imagine purchasing a building and immediately having to shell out $30,000 because you didn't want to fork over the money initially to have it inspected.
Ok so how much does it cost? That’s the question that the budget savvy business owner wants to know. How is this going to affect their bottom line? Well some companies charge by the square footage and that seems to be a pretty common method. At Timberline Inspections I do things slightly different and I actually tailor the plan to fit your budget. I’ll make my recommendations but in the end if you (the business owner) tells me you want to spend $500 or $10,000 on the inspection I’ll make a plan that fits. Keep in mind that when you cut price, things get cut out of the inspection; if you tell me to take $600 of the first bid that means you lose the specialist to inspect the HVAC unit. I would advise that this is a mistake, and you can take my word on it, as unbiased because I don't make anymore from the inspection whether you use my HVAC contracts or not.
Keep in mind for those of you reading this at a distance outside of Alabama, if you have a building in a different state it may be worth hiring an out of state inspection firm (Timberline Inspections) to perform the inspection because paying the travel fees is often cheaper then paying for the cost of living.
For example, the average price of a home inspection in Birmingham is around $400 depending on who you use, in New York you can pay between $1500 and $2000 for the same inspection. That means you could literally find the best inspector in Alabama pay the premium fee of $450 then $500 for the plane ticket and a $400 bonus for traveling and it would be cheaper then you could get the worst home inspector around for. Now it obviously is not that simple and there’s other fees to consider but you get the point, plus licensing and insurance come into play; it would be worth while for commercial properties buyers to look outside your local market.
Ok so you’ve agreed to get your inspection and we’ve come up with a plan to get your building inspected properly. Now we can look into an annual maintenance program. Maintenance programs make sense for all properties, whether you're a home owner, investor, developer, or property management firm getting your annual maintenance inspection will save you 10’s of thousands over the course of owning the property
The best clients I get with this service and the ones that receive the most benefit from the inspection, are the ones that come to me and say “Mackay I’ve got 10 properties, I want you to make me a list of whats wrong with them.” These clients truly want to know what’s wrong with their house, and they will get it fixed and more times then not they will ask me to manage the projects for them.
Here’s how I work this aspect, I recommend for the first year the properties have a residential home inspection complete with a mold test (usually including 3 samples). At this point they will sign an annual maintenance plan (basically this is just a lasting inspection agreement it does not lock you in to an agreement to force you to have them inspected annually so don't panic!). The annual maintenance plan will give me and them some options, we can setup when you want them to occur and I will schedule them at my convenience provided it works for you, in return you receive a discount. This allows me to fill up my slow season with work and you get to capitalize on my cutting you a discount for being an off season. We will perform a mold test every five years and after any water damage is reported in the home. All properties where the land lord pays the utilities on will receive an energy audit with the first inspection. So what kind of price are you looking at?
This varies a lot on the size, age and features of the home; for example a 2000sqf house built in 2000, with a slab floor will run you roughly $350 - $400 in Birmingham, lets say $350 for sake of argument; 3 mold tests will run you an average of $350 for a total of $700 minus your %20 discount for setting up an annual inspection plan. Your total is $660 the first year and $280 each year after that; don't forget too that you get more discount if you have multiple properties. That changes based off the specifics of the property but as an example I recently made a deal with an investor to inspect all 10 of his properties for $2500 ($250 each).
Now back to the inspection agreement for annual maintenance. It can be written two ways, we can write it as a running agreement (basically the standard liability agreement) or a lock in for an annual plan. Why would you lock it in you ask? Because then you get to lock in the price at todays rate of inflation! You might agree to pay it for 5 years but you also agree to the price for five years. It also gives you negotiating room for the price, if you just verbally agree to have them inspected I’ll do it for $300 per house, but if you put it in writing I might do it for $275. If you have a commercial building and you know you will be running that factory for the next 10 years, why wouldn't you lock in the price at todays rate?!
To determine the best course of action you need to look at your specific needs. The plant manager of a factory once told me his monthly electric bill was $8,000! Now a large portion of this was the machinery which there really isn't much we can do to help that, but if we put them on an annual maintenance plan and perform an energy audit the first year we can cut that drastically. This property had 3 HVAC systems that were each the size of a semi trailer, how much juice do you think that was drawing each month? If we tighten the buildings envelope through an energy inspection we can reduce that drastically. Lets say the energy audit costs $10,000 (likely much cheaper unless it’s a huge property), then another $10,000 in upgrades, but I can save you $2,000 a month on electricity alone you would literally pay for the inspection before this years budget is complete and then you have a surplus next year to spend on productivity and quality! I’m hearing promotions in your future.
The bottom line here is that it always makes sense to get an inspection and a maintenance program built, and it usually makes sense to get an energy audit. Do yourself a favor and call an inspection firm that can get you setup right and ensure your property is ready to meet the needs of your business.
I am a United States Army Veteran with over 10 years construction experience prior to my service. After my time in the military I enrolled in InterNACHI's rigorous course work to become a certified member and prepare for the National Home Inspectors Exam. I continue to push inspection courses and education, attaining and exceeding the required continuing education courses