How Can You Determine the Actual Costs of Buying a Commercial or Multi-Family Property?

Written by: Commercial Real Estate Inspectors, LLC

Predicting how much building repairs and mandatory upgrades will cost is part of what brokers and buyers need to know in order to make a sound decision.

Experience & Demand Can Affect Costs 

Although there are industry standards concerning costs, the more experienced the inspector the better this question can be answered. Another variable is what the local contractors in your area are charging. There can also be seasonal factors or emergency situations that can affect costs. An example I have given before is the doubling of the cost of plywood after hurricane Katrina which affected the roofing industry dramatically. The rapid rise in the cost of petroleum also affected the roofing industry as well as the cost of petroleum-based sealers for asphalt parking lots. It takes keeping your finger on the pulse of what is happening at the time of the inspection in addition to knowing the industry standards and the local market to determine costs for each aspect of a particular site.

Here is an example that illustrates this point: The roof-mounted Heating and AC unit are on its last legs. Within five years it will need to be replaced. Based on the size of the unit in this example, the cost is usually about $5,000 just to remove the old one and install a new one – USUALLY! I can look this up in a costing book and I can give this price to my client and my job is theoretically done. That all sounds really good but it is not the whole truth. The other factors are: What kind of connectors are there from the unit to the ducting? What kind of ducting is there? Are there any leaks in the ducting? If the ducting requires replacement what difficulties will that entail? What is the access to the building? What city is the building in? Beverly Hills requires special permits if a crane is required. The answer to these questions may make this $5,000 unit cost more like $9,000 or more depending on these and other variables.

Another area where judgment is needed is in determining whether or not a roof can just be repaired rather than replaced. There are methods being used now - putting elastomeric materials over existing roofing - that cost half or less than a new roof and will keep the interiors cooler, help the environment and reduce the cost of your energy bills. In some circumstances, this method will more than pay for itself in 5 years or less. However, this method can’t be used in all circumstances.

Legislated Requirements Can Affect Costs

One other aspect to keep in mind is how legislated requirements can affect the costs. One example of this is HVAC: heating, venting and air conditioning. In the state of California, there is a mandated requirement regarding energy efficiency that has affected the costs of equipment. Over the past few years, the contractor’s direct cost for a roof mounted heating and AC unit has nearly doubled. Also, the methods used to install some types of HVAC equipment require roof mounted ducting. This can significantly affect the cost of installation or replacements.

The most important thing you can do regarding cost factors is to have an experienced, professional inspector look at your property. You need someone who knows or can find out what is occurring in your specific geographical area, the local requirements and who keeps up with changes in the various industries.

When you hire Commercial Real Estate Inspectors, along with the standard inspection report we include our unique RISK Assessment® which provides you with range of costs based on industry standards and local rates.

Call us TODAY to book your next inspection!

We hope this helps.

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