Springtime Renewal: Taking a Fresh Look at Your

Springtime Renewal: Taking a Fresh Look at Your Property

BY SONYA LOERA

Springtime has finally arrived and, with prospect of seeing the pandemic brought under control, the urge to start fresh is stronger than ever.

It has been a rough year on many levels. For some owners, just collecting rents due has been a struggle. However, now as we move out of survival mode, it is time to do a little spring cleaning and make an honest appraisal of what needs to be done.

Start at the most granular level with a simple walk of your property. Take along a clipboard and make notes about items that require repairing, replacing or simply refreshing. Dividing the items into these categories puts both the costs and the priorities into a more quantifiable perspective.

Talk with your maintenance people and suppliers. Get some ideas as to the possible options and solutions, along with some rough numbers. Then, create a spreadsheet. The likelihood of tackling all that needs to be accomplished is small. However, with a realistic grasp of the overall picture and some bottomline numbers, you can chart a better course of action.

Think, too, about timeframes. Do certain items need immediate attention? Are there legal liabilities involved? Sometimes delaying a repair opens the door to an even bigger problem, so ask about those types of risks, as well.

Thought also needs to be given to the fact that the cost of construction materials and replacement items have been skyrocketing. Is waiting for costs to go down a better option? How long might that take?

Also consider how you are going to pay for those repairs and replacements. Cash, in all likelihood, is going to be required sooner rather than later. Perhaps you have funds set aside that you can use; however even long-held reserves are apt to have been drained over the past year’s challenges.

Refinancing is another option and rates remain close to historic lows. With a refinance, the primary consideration is having sufficient cash flow to cover the added burden of paying back a bigger loan and more interest. What is the likelihood, under current market conditions and rent control limitations, that you will be able to increase rents sufficiently to cover this extra expense burden?

Repeating an-often heard WR Gorman phrase, now it is time to put on your investor hat and do some analysis.

First, what role is this property serving both within your real estate portfolio and your overall financial plan? Do you see this as your pride-ofownership complex that you want to keep for your heirs? Or is this a commodity-type property to be used as wealth building tool.

If your plan is to sell or exchange a property within the next three-to-five years (or sooner), you still need to evaluate the risks and rewards of making or not making certain repairs. The degree to which a need for major work or even signs of deferred maintenance has upon the sales price depends upon buyer demand and inventory. Conferring with a trusted real estate advisor can help you better understand how to watch and judge what is happening, sales-wise, with comparable properties in your area.

If your intention is to hold onto this property, then not only should you tackle those deferred maintenance items, you should also take a look at longer-term major capitalization outlays. But again, before embarking upon these projects, serious thought should be given as to the future prospects for not just the property, itself, but also for the neighborhood and the general area.

Even more importantly, if this is a legacy property, you also need to confirm with your heirs that it is their desire and within their abilities to own and operate the property or properties that you are proposing will be their inheritance.

A lot has changed now, in that we are beginning to perceive a bit more about the post-pandemic world that lies ahead.

About the Author: Sonya Loera joined WR Gorman & Associate in 2013. With a background in accounting she serves as not only officer manager, but also as property manager, transaction coordinator and real estate agent. Founded in 1972 by William (Bill) R. Gorman, this Brea(CA)-based firm focuses on personalized wealth building through real estate. With a client-first philosophy, the firm serves as an expert resource for informed decisionmaking and transitioning that creates sustainable legacies for investors and their heirs.