Landlords and Property Owners!
- How many of you have a Capital Expenditure Budget?
- How many of you have funds set aside now?
- How many of you know what these funds need to spent on and when?
Quiet times bring a great opportunity to plan and reposition your Property for the next wave. Before we jump ahead and assign a Budget, adjust our rents to accommodate the cost and start making journal entries in quick books, we need to understand what were doing it for and why. This is where the Building Audit comes into play.
A Building Audit can be prepared by your Architect and Engineering team at anytime during the life of a Property and should be updated every 3-5 years. The Audit can quite simply take the form of a traditional list of construction cost divisions, providing a short swift analysis of every building element from siding to paint to roofing to heating, air conditioning, asphalt and light bulbs. The analysis will divide up items into routine maintenance and replacement. Once the analysis is done, each item can be assigned with an appropriate interval time, i.e. monthly, annually, 3 – 5 – 10 years and then assigned a cost. Depending on the complexity of each item, the assigned cost may require input from outside Contractors or Building Professionals. Don’t be afraid to ask for help from Industry Professionals. The only thing to be afraid of is budgeting less than what you need.
Why bother? First and foremost, consider the importance of improving your Asset Value. Secondly, consider the 2am phone call when the boiler fails in the building over the Holidays and you or your Tenant are at peak occupancy.
Believe me, you truly want to avoid this call at all costs. So, for the sake of a little forward planning during these quiet times, get a Building Audit in place, get a Capital Expenditure Budget in place and if nothing else, place the goal posts out front so you know where you need to be when the next wave arrives.
By the way, have you or your Accountant considered Cost Segregation? This is a great tool to accelerate depreciation on key elements of your Commercial Property. Contact our office for further information.
Meagan Hill is a Commercial Real Estate Investments Specialist and Principal of NAI Jackson Hole servicing the Jackson Hole WY and Teton Valley ID markets.
For further information, contact Meagan at (307) 734-8700 or meagan@naijacksonhole.com
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