Is your building running on luck?
In June 2022 an inspection report said the air conditioners on the roofs of a property I invested in were over 20 years old. Two units the inspector tested didn’t cool. The repair-quote summary written from that report had no air conditioner replacement in it.
I invested late, and I never saw these. I didn’t really ask and look for them because I incorrectly assumed that the sponsor and their asset manager would have looked at and properly prepared based on the information they had in hand.
What was missing was a policy that said cooling can’t fail, and a plan that put old units in the budget. More importantly, what was missing was an individual in charge with the knowledge to know what the inspection report was telling them.
After 20 years engineering, building and operating real estate, I spent the last 4 investing and owning, and every day I see that gap. Owners and asset managers unprepared for the assets they own.
What you will learn through Eyes Open will change that. You will learn the asset management framework most owners never see, the one top-tier portfolios around the world run on. It will help you run your portfolio like the best of the best do. You will learn from an engineer the ins and outs of buildings without having to learn equations, study physics and become an engineer.
To get started, this is what your building should run on if you want to secretly own the most valuable building on your street: one framework of seven parts, and four answers you can start in 15 minutes.
Short on time? Do this one thing: write your four policy answers (Part 2 below).
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What it is
Three parts set the scene: what’s outside your control, your policy and your people. Four are the loop: Know, Plan, Do, Prove, and Prove reports back to your policy.
Part 1: List what’s outside your control
Purpose: it sets what the building has to deliver.
How you work with it: list your residents, code and law, lenders and insurers, the market and the climate, and what each needs from the building.
Part 2: Write your policy
Purpose: it turns what you want into rules the work can be held to.
How you work with it: write four answers: what can’t fail, what you can tolerate, how you’ll manage it, and what resources you’ll allocate. Then test any task: can whoever does it trace why, back to your policy? Experts call that line of sight.
Part 3: Name your people
Purpose: a policy only happens through people.
How you work with it: name your residents, your team (your property manager (PM) and staff) and your vendors. Settle who decides, who does the work, and who has the skills.
Part 4: Know the building
Purpose: decisions stand on the building’s record, so a wrong line in it is a risk.
How you work with it: write down what you own, where it is, how old it is and what shape it’s in. Check age first: heating and cooling equipment usually lasts 15 to 20 years, my rule of thumb, and only if it was the right equipment, installed well and maintained.
Part 5: Plan the work
Purpose: it turns what you know into a list of work, planned over each item’s life and decided by risk.
How you work with it: decide what can’t fail, how it’s protected, and what gets spent when. One rule: when a report or your record says something is past its life, it goes into the plan as a replacement, a deferral with a date, or a written reason it can wait.
Part 6: Do the work
Purpose: it carries out the plan. Operate, maintain and dispose drive most of the cost, so plan them as one.
How you work with it: run the work to the plan. What you buy carries into every later stage.
Part 7: Prove it
Purpose: it shows whether the work met your policy.
How you work with it: check results against your policy, report them, and take what you learned back to it.
Check it
Write a first draft of your four policy answers on one page, in 15 minutes.
An answer you can’t write is your weakest part. A standard inspection won’t show you this. A real policy takes months, and you may need a professional for the final say on condition.
Why it matters
With no written policy, each breakdown is a new argument, and the cheapest fix usually wins.
Your insurer, lender and next buyer each turn condition into money.
Hand it to your property manager: “Here’s the system we’re going to run. What would you add?”
What I look at: whether the objectives are written down, before any equipment. Put the four answers on one page, and your next repair gets a rule, not an argument.
Reply to this email: which of the seven parts is weakest on your building?
This week you
Wrote a first draft of your four policy answers in 15 minutes.
Know the rule for old equipment: it goes in the plan with a date, or you write down why not.
What’s next
Read this first: Who’s taking care of your building?
Next: Lesson 1, Thu Nov 12. Where the record starts, and why a list of what you own decides what you pay later.
A building on a written plan doesn’t need luck.
Forward this to another owner, so they can see what their building runs on.
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—Jon