Today’ s guest speaker at the San Jose Apartment Broker’s Forum was John Klimp of Mayfield Investment Company. Mr. Klimp considers himself a Value Add expert via the renovation approach. The conversation gravitated towards due diligence and how to properly conduct a due diligence review of a property.

Mr. Klimp’s first pearl of wisdom, “Ask questions- early and often”. In his due diligence Mr. Klimp will talk with vendors who have serviced the property in the past. Including but not limited to; plumbers, roofers, air conditioning technicians (HVAC), architects and engineers, etc. Close scrutiny of the Title History is a must! Knowing about easements could add value to your deal or give you reason to look at the next property.

Mr. Klimp gave the example of storm drains and pumps- on a particular property, the storm drains that led to a collection area required pumps to expel rain water and were not in working order. As we enjoy a short rainy season this was overlooked by the previous owner AND since now discovered would need to be disclosed to all future buyers, Mr Klimp was able to negotiate a lower acquisition price and resolve the issue himself. In effect, Mr. Klimp was able to discover a problem and provide the solution.

Reviewing past articles, such as; prior appraisals, loan documents, ownership history, public records for building permits, occupancy permits and Fire Department sprinkler agreements was discussed. Learning about the obvious was also discussed; what capital expenditures did present ownership accomplish- do the warranties transfer with the sale? Careful review of income and expenses, existing leases, etc.

The following is a synopsis of the Q&A,

Q What do you like for unit mix?

A Mr. Klimp responded that was situational to personal preference. (Example: Studios are good around college campuses)

Q Where to start renovations?

A “curb appeal” – First impressions are important, update and maintain the landscaping in the common areas and entry, drive bys produce many new tenants, so make the landscape appealing. Keep the Air Conditioning in a comfortable zone and keep your equipment in top working order.

Q What is the biggest bang for the buck in interior renovations?

A Paint- use standard modern colors to differentiate your units.

To hear the remainder of the Q&A, please contact me at Pete@ConsultPete.com or 925-719-3569. Your feedback and comments are always appreciated. Many thanks to my listeners and readers for providing feedback. To learn more about my background, visit Consult Pete. To learn more about my company strategy, visit Commercial MasterMinds.