REAL TALK RENTALS

Inspections: What’s Allowed and Not Allowed

Ben Bailey: Coming up on today's episode of Real Talk Rentals, we're going to talk about inspections, what's allowed and what's not allowed when inspecting a property. Welcome back to Real Talk Rentals, a podcast brought to you by Oncue Property Management. We're here to give you all the behind the scenes on owning an investment property and everything that goes into it. I'm Ben. I'll be your host. And with me, as always, is Mr. Eric Dixon, the CO two expert on everything rental property in Arizona. And just kind of in general, you know, which is good because today we're going to talk about something that doesn't seem like on its surface, there's a lot to it, I think. But once you dig in, there's more than you might think, and that's inspections. Um, I can say personally, before I started working at Oncue, I only thought there was one kind of inspection. It was they come, they look at everything and they leave. That's it. That's all I thought there was. But there's a lot. Yeah. So, um, maybe we just start, Eric and you kind of walk us through the different kinds of inspections and what they're for if you're using a property management company.

Eric Dixon: Okay, Yeah, no, and what's funny is the first thing that comes to mind when you say inspections is my favorite TV show. Inspector Gadget. Growing up, did you ever watch that? Yeah, dude, it's the best. Now, if we could only get our inspectors to have all the inspector gadget qualities, you know? Oh, yeah. Anyway, that theme song you're talking and it's like, dun dun dun dun dun dun dun dun dun. Anyways, so all right, that tangents done the inspections and the property management world, though. Um. There are just your simple most property management companies do at least to the move in and the move out and we'll get to that right. One is to document before and wants to document after and that should be it. But really for us and a lot of more seasoned property managers are ones who have been doing it a long time. It actually starts from day one and from the day the relationship starts and you go document and you do an inspection to determine the rent readiness of the home. Like, is this ready to rent? Is it clean? Is the paint good? Is the do the blinds work, the appliances working, or, you know, that sort of stuff.

Ben Bailey: And this is before someone maybe even applies. It's just bringing the property on. Oh, yeah, this is just.

Eric Dixon: Bringing it to market, right? It's like, let's say you're hiring us, Ben, and you say, Hey, my house is ready. Well, we do an inspection, turn on every faucet, flush every toilet, um, you know, document the cleanliness, that sort of thing. And then we make sure it's rent ready. Sometimes we're like, Man, this place is spick and span. It's perfect. Let's schedule pictures right away. Right. Oftentimes, there's a couple of things, right? And I look at it like our long time listener. You know, Matt is a friend of the pod. A friend of the pod. Yeah. There we go. Uh, you know, he's in this boat, too, where, like, he's moving and he's going to be a landlord now for the first time. And he's been signing clients up for years, and now he's in wearing these shoes of crap. Now I'm the landlord. Yeah. And all these projects that I knew I was going to do someday suddenly have to be done in order to get a tenant moved in.

Ben Bailey: We talked about that in our rent ready episode where there's things that you might live with because you've been there forever, where it's like, you know, this door doesn't open. That's fine. Don't go out that way, just leave it locked. But you can't put it on the market as a rental like that for a number of reasons so that all that stuff's got to be addressed. Yep.

Eric Dixon: And so that's the rent ready, right? And sometimes it's us gathering estimates, sometimes it's just saying, Hey, Ben, this room needs painted and maybe you want to do it yourself or whatever. So we'll get you free estimates for the maintenance, maybe recurring services. If you have a pool, we could get you estimates for pool service, landscape service, pest control, you know, different, different recurring services there. And then I mentioned we'll test the functionality of the major components AC, heat appliances, toilets, faucets, sprinkler system, whatever it is. Right, Right. Um, and so that's kind of the rent ready inspection. We get through that process, get the house rent ready. Once the house is rent ready, the next inspection that a lot of people don't call it an inspection, but we call it a marketing inspection where we would get the photographer if we're doing any video, if we're doing 3D renderings to do walkthroughs, the 3D walkthroughs you see online all the time, we rely heavily on that, that technology. So that's the marketing inspection. It gathers all that information. Then we can put it in the ads and the listing and then it's on the market, right? So you'll have somebody apply for the house, they'll get approved and move in.

Eric Dixon: And right before they move in, I'll back up. Just a hair is the next inspection. It's the move in inspection, right? So right before they move in, we'll send our inspectors out and they'll do a move in inspection document the home in in the condition it's in. Um, and pick up the lock box, pick up the keys, pick up the sign if there is one, and, and then the tenants can move in after that. And it protects both parties. It protects the landlord because if the tenants do damage, we can compare the before and after pictures. Yeah, but it protects the tenant as well. So that, hey, we did a move in inspection. That blind was already cracked. Yeah. It doesn't need to be replaced, but it's cracked. So you're not responsible for that. On when you move out or any of that stuff. Sometimes carpet it's cleaned, but there may be a stain or, you know, something like that and we'll document all that. Yeah. So it protects both parties.

Ben Bailey: I think that's like one of renter's biggest fears is that they're going to get blamed for something they didn't do. Yep. You know, be like the garage always had this crack in the asphalt. Yep. And now I'm getting charged for it. Yeah. So the move in inspection, like you said, it helps both parties. It covers them know.

Eric Dixon: And we property managers are, are on. We have to play both sides. Right. We're not there just we are representing the owner. But we do have to advocate for the tenant and protect them as well. Right. And we want to be the the in between to make sure that that's smooth. So so, so far, you got the rent ready, you got the the marketing inspection and the move in inspection. The lease is going on and throughout the lease we offer it up to two times a year. There's a routine inspection is what we call it. And we were talking yesterday that might be a kind of an on cue word. Yeah, a routine inspection. Some people call it mid lease inspection. Um, spot. Spot inspection. Just an annual or a bi annual inspection or something. We call it a routine because it's just a routine. We schedule it with the tenant, we send them a certified notice and they can schedule it. If it doesn't work with their schedule, we'll go in and document the condition of the home. It is not to open every drawer, open all the pantry and your appliances. It's it's to document the overall overall condition, but also the. A smell test if there's pets or not. You know, just a couple quick, easy, easy ones. Yeah.

Ben Bailey: We have amazing inspectors here at On-q in our department. And one thing I see all the time just looking online about what people are saying about us, and we get compliments all the time because people are nervous, right? They're nervous about having an inspector come to their property like you're trying, stranger.

Eric Dixon: Get in there and.

Ben Bailey: You're just coming to try and find something. Kick me out. And then they'll say, you know, he came in and said, Oh, well, you should. We'll fix this. You know, like if you put this on the portal or, you know, you can put this in to do it, and they'll realize that certain things cover them. And they didn't even know. Yeah, no.

Eric Dixon: It's twofold, right? It's we're sending our own representative. It's an employee of our company. Right. It's not some third party stranger that's coming in. Right. And they go in it, Hey, I got a document, the condition. But I'm here as a human being to. Hey, if your shower is dripping and leaking, you got to turn that in. Yeah, that's a landlord responsible item. You know, they're not advocating to make sure that landlords do maintenance, but the stuff that they find is stuff that the landlords want done. It's.

Ben Bailey: It's preventative and.

Eric Dixon: Preventative maintenance in a lot, like you said. But it's also stuff that the tenants like, Oh, I just lived with it. It's like, man that's going to do secondary damage. It's going to, you know, leave rust stains on the on the sink, you know. So yeah, that's an awesome point. We get love our inspectors, they're awesome. And then the last one, so we do want those once or twice throughout the year, depending on what the owner or the our client, you know, subscribes to. And then once the tenant gives notice or the landlord gives notice and they move out, we'll do the move out inspection and then we'll compare that to the move in. And that's how we determine if there are any damages. Going back to the episode about dispositions, you know, Right. We'll use the move out as the documentation portion and get estimates from there if needed and go from there. So those are the main five that that at least here at On-q we do. And I feel like it covers the whole realm of what you would need.

Ben Bailey: Awesome. Um, so I know you're, you're not a lawyer, but we did do research for this, so I'm going to ask you what, what are the rules or laws around inspections? I think you see that a lot where residents, tenants are concerned. You know, they feel like, what are my rights here or what? You know what? What are you allowed to come in here? They don't know for sure. So what are the the rules and regulations around that? Well, no.

Eric Dixon: And this is good stuff just to know because especially for self managers, a lot of them are breaking the law or breaking the rules without even knowing it. And and the tenants are kind of just going with the flow. Right. But if you're self-managing and your tenant does know their rights and does know the notices required, you could get in hot water pretty quick if you just show up or we've had it where landlords are like, Oh yeah, when they're not home, just use the key. And I just go in and it's like, Oh yeah, don't do that anymore.

Ben Bailey: That's breaking and entering, actually.

Eric Dixon: Yeah. So, so think break it up between vacant and occupied properties. Okay. You know, if the property is vacant, there aren't, you know, notice requirements and so forth. If you're under management with your property manager, you know, they have access when it's vacant to do to make sure it's locked up and secure, to take pictures for showings, you know, that sort of stuff. What what I do want to say is just use common sense. You know, don't don't use the bathroom in the vacant property. Don't you know, turn on especially in the summer, don't turn on the AC to 70 and then leave it on when you leave. If you if you're going to be there a while and you need the air conditioning. Yeah, by all means, turn it on, use it. But when you leave, put it back up, right? You know, to where it was before. Um, and it's just making sure lights are off. Lights are off when you leave or the lights that were on when you got there, leave those ones on. Maybe the owner wants the front porch light on all night or whatever. So it's using common sense. Um, I'll say it again. Don't use the bathroom, man. I mean, when you're showing houses for sale, for rent, for your own properties, it's like you can stop by or, you know, circle K if that's an issue.

Eric Dixon: Now Occupied gets different, right? So that's when a tenant lives there. They're in a lease that is their home. You know, as far as legally, that is, they have their rights to quiet enjoyment in that home. And so you do have to send at least they're talking about Arizona here, 48 hour written notice or an agreed upon time, if it's less than that. So sometimes we'll reach out to the tenant and call them and say, hey, something came up. Is there any way the owner could go by tomorrow or the maintenance or the or the routine inspector? And they're like, Oh, yeah, I'm going to be here, no problem. So if it's a mutually agreed upon deal, then it could be sooner. But as far as you know, written notice needs to be at least 48 hours. All the certified mail or communication we do in writing, we try to do far more than 48 hours. To me, 48 hours sometimes just isn't even enough. It's like, yeah, so you're telling me you could tell me Monday morning that you're coming Wednesday afternoon no matter what? Yeah. And like, yeah, legally, yes, you could do that. But you try and try and put yourself in their shoes. Yeah. Like, well, I don't want you to have to call off work for me to do this, so. Yeah.

Ben Bailey: Or maybe we're having a birthday party. You that day could not come. And like you said, it's it's their home. You may own that property, but it's their home, you know. So, like, it is important to, you know.

Eric Dixon: Yeah. There are like offshoot examples of like no push comes to shove. I have to get in there. Sure. And it could be because this is habitual. You're never letting me in. I'm just gonna have to put my foot down type thing. Or classic one is emergencies, right? And it's like, hey, the AC went out. This happens in the summer all the time. And it's like, Hey, we got a guy who can go tomorrow at noon. Can we go in? And they're like, Well, I'm going to be at work. Do you know what? Just go in with the key you guys have on file or whatever, or I'll leave it unlocked or they have to get in there, Right? And so an emergency, you just kind of figure it out. Another emergency is if there's smoke coming from inside the house, something's on fire or there's water coming out of the garage. We as the management company and the landlord have permission to enter to figure that out, you know, So, you know, we.

Ben Bailey: Don't have to send a letter. It says we'll be there in two days. Yes, sir. Because we're going.

Eric Dixon: To let this burn down. Yeah. No. So those emergencies, it sounds silly, but those are actual in the statutes. They're in Arizona. They're they're detailed out in writing. Like, hey, in emergencies, you have permission to enter. Other than that, though, the landlord's got to step back and realize this isn't your home anymore as far as you use of it, you know. And so. Right. Yes. Your name is on title and you own the house. But, you know, the use of the house is now the tenants for that duration of the lease. And unless you obey or without those notices, you can't go in. Right.

Ben Bailey: Okay. So talking about inspections, then, let's talk about how they are documented. Um, you know, there I've seen everything from like just a paper check, you know, that someone's filling out. But do you feel pictures are essential, necessary, or are they required what What is required to make a good inspection in your mind?

Eric Dixon: Yeah. So it actually starting in like 2010, 11, when I got from more into property management, from real estate sales, initially it was I didn't really know any better. And the move ins didn't require pictures. You know, us as a management company, we take some pictures in the marketing photos and stuff, but the tenants move in form was just like, good, fair, bad, you know? Yeah, great, whatever. And they check boxes if they want. They can email pictures. And it was kind of annoying like, Oh, you're going to email all these pictures. It's like 2010. It just wasn't as easy to receive hundreds of photos and upload them to a cloud and, you know, store them for the duration of the lease and all that stuff. Nowadays, 2023, it's like expected. It's like, yeah, you could take a couple hundred photos, they'll shoot up to wherever you're storing them. You'll have access to them forever. They'll be time stamped, organized by address, by move in date, all that stuff. So pictures are a must, must, must now. Right. Um, and again, it's to protect the tenant and the owner, you know, both sides. Um, there's videos are helpful. We do 3D renderings with the Matterport technology that does, you know, the three, it captures everything in 3D. So it's like a lot of that is you could do an inspection and it's like the walls look great. There's no holes in the walls. It looks freshly painted, man. They took really good care of it. But sometimes you don't realize until you compare the 3D renderings side by side like that wall was this whole room was green when you moved in. Now it's black or Yeah, it looks great, but it's black, right? Or whatever. And a lot of times just the wall by wall inspections, you don't realize to, to compare some of that stuff.

Ben Bailey: Um, it's funny that you said when you first started about the list, um, when I, until about when I first lived in a rental, when I first got married, we lived in this little one bedroom bedroom apartment in Huntington Beach. Right. Uh, best place you could live is, you know, newlywed couple were like, steps from the beach. It was awesome, right? That sounds amazing right now.

Eric Dixon: Yeah. I'm not newly married, but it sounds amazing.

Ben Bailey: Um, little tiny place. I mean, not too much bigger than this room, right? But it's just two of us. That's all we need. So when we move in, we got, like, a move in inspection form. And I went through. I took pictures. You know, this is with an actual digital camera. Didn't have, like, a smartphone to do that. I filled this thing out every inch, right? Like, oh, there's a little crack here, you know, this and that. And this is an old house. So there was a lot of little first.

Eric Dixon: Rental is a married couple. You're like, I'm going to do this. Right?

Ben Bailey: Exactly right. And our security deposit was $1,000. Right. Um. So we stay there for two years and we kind of outgrew it and we're like, Are we going to move to a bigger place? And the landlord, she was great, got along with her, awesome. She shows up at my work with an envelope of cash, just unannounced. She she didn't even look at the move in inspection. Right. She even asked for a copy of it. I was, like, ready? You know, like, Hey, I got everything you need. And she gave me $800 and said it was pretty clean and that was it. And was like, pretty clean.

Eric Dixon: Is a $200 charge. Yeah.

Ben Bailey: And I honestly, like, I was so taken aback. And also, I'm just like, I was young, I was early 20s and I was just like. Okay. Thanks.

Eric Dixon: Is this pretty good? Yeah. 80% of my money back.

Ben Bailey: This feels all right, you know? Take this. So it's funny, like to think back then. I thought that was perfectly like. I did pretty good. Got it. Got my 800 bucks back. But without all those pictures and stuff, you know, like, you think of what we do now, documenting against that. Move on. I probably would have gotten over that. Yeah.

Eric Dixon: Would you be able to fight it a little bit? So, yeah, there's a couple things that just have changed. They've evolved since you rented and since I've been in it is the tenants would document it just like you did and you held on to that for a year or two years, right? Yeah. But you didn't have a place to like give it to the landlord through a portal or through an email. That's like, it'd be tough to send by email. 15 years ago, 100 photos. Oh, yeah? What do you send a card, you know, and say, Hey, don't lose that. And so the tenants would hold on to this stuff. And then the property managers are doing the disposition and they don't even know that the tenant had those photos until they're fighting them for the money. So. Right. What's evolved since then is kind of there's two parts with how you document inspections now. It's obviously the more pictures, the better. If you can do it by organized in a fashion where, you know, this is the the master bedroom, the bedroom, one bedroom, two bedroom, three. Like we have it down to where you start at a certain spot and then you always go counterclockwise, clockwise, and then you go to floor two and go clockwise.

Eric Dixon: And so we always know bedroom four is going to be where it is, Right? Right. Um, and so there's a lot of that within, within our company. But the whole point is you have that actual inspection, it's got the pictures, descriptions, the breakdowns, and then you have the second part is the accessibility, like the property manager, the tenant and the owner need access to these things, you know, through whether nowadays it's in a portal or an online login or somewhere where it's saved throughout the lease, they can jump into their move an inspection any time their routine inspections, any time they're spot inspections, anytime marketing inspections and they're rent ready inspections, then they're estimates and they're work orders. All that has to be accessible. If if it's not, you got to find a property manager that has that technology because you should be able to grab your phone at any time and say, I wonder what the move out inspection looked like last week. Sure. You pull it up. You know, unfortunately. What day is it? It's January 10th. I had a an abandonment today. One of my tenants just skipped out yesterday. Oh, bummer. So before this recording, two minutes before this property manager is like, Hey, come over, here's the inspection man.

Eric Dixon: You just showed up. And it's what is incredible about it is there was somebody there, I don't know, 45 minutes ago, documented it real quick. They haven't finished. I just saw that it's uploading, right? Yeah. And I get to see the pictures. I don't have to drive over there. I don't need to drop everything tonight and go see what it looks like and get my own vendors and do all this stuff that by the time this is done recording, I'll be able to go look at the inspection and say, Hey, this is what's wrong, this is what we need to do. I could show my wife at home tonight because we'll just jump in on our laptop. Yeah. And look, so the accessibility factor is almost just as important. Sure. Because it saves the landlords who have hired these management companies to it saves them time and energy and it just puts puts you at ease that. Yeah, it does suck that they just disappeared and they took off yesterday but we're already on it. Next day we're on it. We got the inspection, got it. Rekeyed And it's going to start getting work done this week, right?

Ben Bailey: Especially, I mean, you're fortunate enough you live in state, You know those things. I mean, imagine if you lived in like Texas or something. It's like you can't drive by. No, I was looking.

Eric Dixon: At my calendar going, okay, it's 50 minutes away. I'm going to get home at this time tonight. I wonder what time I could go tonight. And then I'm like, I don't need to go. Like, the inspection is already done. All I'm going to do is validate that the pictures they took sure are correct. Yeah. You know, so it's like, no need to, you know, practice what we preach and say no, You depend on the technology and the management service to do that stuff. So yeah, it's just ironic that I'm like, Dude, I'm looking at a horrible inspection right now. Yeah, right before we talk about it.

Ben Bailey: Yeah, well, you know, it's better I guess, to know than not know, right?

Eric Dixon: No, I know.

Ben Bailey: Yeah, exactly. That'd be a long drive over there where you're just anticipating, like, why haven't.

Eric Dixon: We got rent yet. Yeah. 10th of the month. So we kind of were. We're anticipating something and then. Yeah. Heard the news today. Yeah.

Ben Bailey: All right. So just for the last little thing I wanted to touch on, and again, we're not legal experts. We did research to look this up, but you should definitely look up your state and everything. But from a resident perspective, and this is by far the thing I see most searched online, you type in, you know, property inspections. It's residents asking. What? What are. What are my. You know. What are my rights here, you know?

Eric Dixon: Yeah. And what are my protections that the landlord can't just, like, show up and walk in?

Ben Bailey: Yeah. So I think from a resident perspective, let's touch on that and just say like what? What are they allowed in this process to say and not say? Yeah.

Eric Dixon: And actually so I copied and pasted from the from a statute a little bit. Just this is Arizona just to kind of give you a broad sense of it. But, you know, the tenants shall not unreasonably withhold consent to the landlord. If there was the 48 hour notice or if it's an emergency with smoke coming out or water coming out of the house or, you know, if it's one of those declared emergencies or if they give proper notice, they can't refuse the house. And if they do, then there's legal options to to gain access and it becomes sticky and it's going to end horribly. Yeah. But at the same time, the landlord can't harass them and can't, you know, make it super inconvenient on purpose. And you can't do a routine inspection every single month. You know, it's just it's not reasonable.

Ben Bailey: You mentioned that when you said that we only do two a year to a year, up to two a year. Like you can't you can't say like, hey, every three weeks I want to pop in. Yeah.

Eric Dixon: And you think about it. So there's a 12 month lease, say there's average leases are anywhere between 20 to 24 months. But let's say it's a one year lease. We do a move in at month zero. You do a routine inspection on month four and ten, and then you're doing if they move out at the end of at the end of the 12 months, you do a move out inspection and it's like there's been an inspector in there four times and 12 months. There's a there's plenty of documentation. Two of them were when it was vacant and two of them while it was occupied. And a lot of a lot of people ask like, well, why do you need to do that? Second one at month 9 or 10? And a lot of times that helps you determine if you want to renew the lease. Sure. It's like, Hey, this place is in great shape. They said they had a dog and they have a dog or hey, they said they had no pets and they have three dogs. I don't know if I want to renew this lease. Right. You know, or whatever. So there's just. And some owners, they opt to do one. So it's like, hey, do you know what? I just want one somewhere in the middle. Sure. Give me a kind of a gauge of where things are at.

Eric Dixon: But it's kind of a two way street. You know, the landlords, you got to give notice. You have to be reasonable. You can't intimidate, you can't harass. You just need to be a human being and realize, you know what, What? Take it for what it is. It's their home. Like, you have to realize that. And luckily for property managers and luckily for tenants in this regard, we are kind of the barrier because a lot of owners, they would just show up and they'll they'll call us and say, Hey, my flight lands tomorrow. Can you let the tenant know I'm coming by tomorrow night? And I'm like, whoa, whoa, whoa, whoa. Like, there's a chance that we could call them and see. But if they say no, like, you cannot go tomorrow. Yeah, I have a key. It's like, Yeah, about that. Yeah. Stop by the office first, you know, So, so anyway, it's just being reasonable and then the tenant, you just got to be reasonable. You do have a right to have quiet enjoyment in the home. That's kind of the, the lingo in the statutes and stuff. And I think if both if both landlord and tenant realize kind of their their place in the whole lease, then everything usually works out fine. Yeah.

Ben Bailey: I think you said it great where you said it's it's their home now, the tenants and going back to one of our first episodes we talked about. As a owner, you have to. This is not your home anymore. You have to stop looking at it as a house and look at it as an investment. If you can't do that, you shouldn't be a landlord. It's an investment.

Eric Dixon: That provides housing for somebody else. And yes, you have rights to the ownership and it is yours technically, but it's like it's actually a wonderful it's a beautiful thing that can provide that for them. But you have to give that that to them.

Ben Bailey: Yeah. Um, just to finish up, I just want to touch on when we were looking this up yesterday, do you remember we saw that story about a tenant who the owner would come by and sometimes stay the night. Oh dude, when they were in town and essentially kicks in for utilities.

Eric Dixon: But no, no, he said he said, hey, he he separately locked the garage to be his own little like and has a couch in there. And he said occasionally, I'm just going to come crash in the garage. And because of that, I'll give you a break on utilities but or something of $60 a month. Yeah. So it's like they lose the garage access to the garage and they've got some rando aka the owner, just showing up whenever he wants to crash. Yeah. It was 60 bucks a month they got or something. You're like oh my gosh.

Ben Bailey: And this person, this poor person is like so confused. In this situation, the best they can do is like, go.

Eric Dixon: To that online forum. Like, Hey, what would you guys do in this? It's like on Reddit, you know, and it's like, um, move. Yeah.

Ben Bailey: I mean, imagine if you were living in that home as an owner and someone was like, Hey, don't use the garage. I'm going to come sleep. You wouldn't put up with that?

Eric Dixon: Yeah, no, And it's it's one of those things that, like, mid lease is like, Hey, by the way, I'm taking over the garage. It's okay. I'm going to pay you $60 a month for it. It's like, whoa, whoa, whoa. Yeah, yeah. That's crazy. There are crazy scenarios and that that happens to be one of the self-managing nightmares right there. Yeah. You know, so. Yeah.

Ben Bailey: All right. Well, I think we covered inspections just about all the ins and outs of it. So that's for us this time. Be sure to subscribe to the show and leave us a five star review. Wherever you're listening, it really helps out and we'll see you next time.