A commercial building purchase is a significant investment. A portfolio manager will order a report and inspection of the building before making a decision. This information is vital to making an informed purchase.
A commercial building inspection will highlight the condition of the property and the cost to repair it. What will a commercial inspector be looking for? Continue reading to learn about building inspection basics.
The basics of commercial building inspections
A commercial building inspector will inspect the building from roof to foundation. Let’s look at some basics before we get into the process of building inspection.
What is a Commercial Building?
A commercial building can be a structure or building located on commercial real estate. These buildings are designed to generate profits, either through capital gains or rental income. Commercial buildings can be divided into five main categories: office buildings (retail/restaurant), multifamily dwellings (multifamily housing), land, and other.
Commercial buildings and property examples include:
Cafés
Condominiums
Convenience Stores
Factories
Hotels and Lodging
Shopping Malls
Manufacturing Facilities
Medical Office Suites
Mixed-use buildings
Multifamily Housing
Office Buildings
Residential Units for Profit
Restaurants
Shopping Centres
Sports Facilities
Storage Facilities
Strip Malls
Warehouses
Who conducts an inspection of a commercial building?
Asset managers can hire a commercial building inspection. First, an engineer or architect is a good choice. They have a wide range of backgrounds, including in building trades, facility management, maintenance and other related subjects. Engineers and architects can charge a premium for their specialized knowledge and services.
Another option is to hire an inspector for commercial buildings. Some specialize in both commercial and residential inspections, but you should be cautious. A commercial inspection differs from a home inspection. A Commercial Inspection in Tampa is different from a residential inspection.
What is the purpose of a commercial property inspection?
Return on Investment (ROI), and residual value are the two main factors that influence commercial real estate purchases. Portfolio managers are interested in two things: How much will it cost and how much profit will I get on my investment?
An inspection can help. This inspection reveals the lifespan of five major building systems:
Roofs
Structural Integrity
Electrical
The Plumbing
HVAC (Heating, Ventilation and Cooling)
Real estate management teams are interested in knowing if a roof or HVAC system needs to be replaced or upgraded in the future, or if there is a need to upgrade electrical components due to changes in the building’s use. An audit or inspection of the building can help answer these questions. The report will ultimately inform the portfolio company whether the investment in the property was worth it.
Four things a commercial building inspector will check
Commercial property can be expensive and requires extensive research before making a purchase decision. Investors, portfolio lenders, commercial mortgage-backed securities (CMBS) and insurance lenders order property condition assessment (PCA) to learn more about a particular property or before signing a purchase contract.
Here are the four main things that a commercial inspector is going to focus on when inspecting a business.
1. The Five Major Systems of a Building
Commercial buildings generally have five major systems: electrical, mechanical, heating, plumbing, and air conditioning/ventilation. Inspectors make sure that all systems are working properly. The inspector will estimate the cost to repair or replace a system if it is not working properly. The inspector also checks the sprinkler system, fire safety systems and building alarms.
2. The Exterior of the Building
The exterior of a building includes more than just its walls. It also includes landscaping, parking structures and roofing. The inspector will determine if the building is structurally sound, and highlight any repair costs. Inspectors can rely on the expertise of roofing experts, contractors, building code examiners, and other experts to inspect a building’s exterior.
3. The Interior of the Building
The inspector will check the interior of the building to ensure that it meets local building codes and also to identify any safety hazards and risks. Inspectors examine the walls, floors and other areas of the building, including bathrooms, offices, kitchens, and similar spaces. This part of the inspection reveals any interior renovations that are needed (especially if something within the building does not meet code).
4. The Documentation of the Building
Commercial building inspectors examine many documents as part of the inspection process. They may examine appraisals, floor plans and maintenance records. These records help investors determine the true value of a property by revealing the cost of ownership.
The inspector will compile his findings into a final Property Condition Report. The report includes photos and written proof of observations. The report will also include any recommendations made by the inspector regarding how to correct the problem or whether to request follow-up tests from a specialist. Most often, there will be an estimate of the cost for future repairs or replacements.
Commercial Building Inspection Checklist: Free Resource
When considering an investment, it is important to partner with a commercial property inspector who has experience. Don’t take the inspector’s word for it.
This property inspection check list will help you identify what you should look out for when you walk through the building that you are considering buying. Inadequate property inspections will protect you from real estate investment fraud.
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