Most buyers think a property inspection is a formality. You hire an inspector, get a report, negotiate a little, and move on. In reality, inspections often miss or under-emphasize the issues that cost investors the most money later—especially in multifamily and older buildings.
In this conversation, we sat down with Tony Escamilla, owner of Villa Property Inspections, who has completed more than 8,000 inspections over the past 27 years across single-family homes, multifamily properties, and large commercial buildings. What he shared is exactly what many investors learn the hard way: passing inspection does not mean a property is safe, insurable, or financially predictable.
Why inspections fail investors
Most inspections technically “pass” because systems are working on the day of inspection. That doesn’t mean they’re in good condition or anywhere near the end of their useful life. Investors often focus on cosmetic issues or rely entirely on the inspector’s summary page, while the real financial risks are buried deeper in the report.
According to Tony, the goal of a proper inspection isn’t just to identify what’s broken today—it’s to understand what will fail soon and how much that failure will cost.
The four most expensive inspection issues
Across thousands of inspections, four systems consistently cause the biggest financial problems for investors.
The first is the roof. A roof can look fine and still be nearing the end of its remaining useful life. Many commercial roofs are designed for 25 to 30 years, but lack of maintenance can reduce that dramatically. A roof with five years left may not be a deal killer, but if you don’t budget for it, it becomes a crisis.
The second is HVAC systems. In multifamily buildings, especially two- and three-story properties with rooftop package units, replacement costs add up fast. Even if the units are currently working, many are well past their expected lifespan. Once cranes, labor, and access challenges are factored in, HVAC replacement becomes a major capital event that many buyers fail to plan for.
The third is plumbing. Older buildings often still have original galvanized or cast-iron plumbing. Everything may function during inspection, but these systems are ticking time bombs. Investors face either full system replacement or escalating repair and maintenance costs over time.
The fourth—and increasingly the most problematic—is electrical.
Why electrical issues are now an insurance problem
Electrical panels are no longer just a safety concern. They are now a major insurance issue, especially in California and increasingly in other states.
Insurance companies are flagging certain panel brands and configurations, requiring electrical inspections before issuing or renewing policies. In some cases, entire buildings must replace every breaker or panel just to maintain coverage.
Tony shared a recent example where a 50-unit building had to replace every breaker in every unit—not because the panels were old, but because insurers would not accept them. These are the kinds of costs that can derail a deal if discovered too late.
When inspection issues become deal killers
Not every inspection issue kills a deal. Most problems are manageable if they’re discovered early and priced correctly. The real danger lies in structural and foundation issues.
In coastal areas like Long Beach and the South Bay, older buildings often suffer from concrete deterioration, drainage problems, and differential settlement. Cracks alone are not necessarily a problem—but movement is. Uneven floors, doors that don’t close properly, and ongoing settlement can indicate structural repairs that quickly become cost-prohibitive.
Certain soil conditions, such as expansive soil, further complicate these issues. These soils expand when wet and contract when dry, stressing foundations over time. These problems aren’t always deal killers, but they require informed planning and long-term budgeting.
SB 721 balcony inspections: no longer optional
California’s SB 721 balcony inspection law has added another layer of urgency for multifamily owners. The law requires inspections of balconies, decks, elevated walkways, and stairs, with compliance deadlines now actively enforced by many cities.
What many owners don’t realize is that SB 721 is also becoming an insurance requirement. Insurers are beginning to request proof of completed balcony inspections during policy renewals. Even when issues are minor and maintenance-related, lack of documentation can jeopardize coverage.
Why cost projections matter more than inspection reports
One of the most valuable tools discussed was the concept of capital replacement projections. Instead of reacting to failures, investors should understand when systems will need replacement and how much those replacements will cost in the future—not today.
This approach accounts for remaining useful life, inflation, labor costs, equipment access, and regulatory changes. A roof replacement five years from now will not cost what it costs today. Investors who ignore this reality often underestimate their future capital needs by tens or hundreds of thousands of dollars.
New construction still needs inspections
A common misconception is that new construction doesn’t need inspections. In practice, inspectors often find more serious issues in brand-new buildings than in older ones.
With multiple subcontractors involved, mistakes are common—structural members notched improperly, plumbing installed incorrectly, electrical systems spliced in ways that violate code. These issues are often hidden once walls are closed and finishes are installed.
One of the smartest strategies for buyers of new construction is the 11-month warranty inspection. Most builders provide a one-year warranty, and an inspection just before that warranty expires can identify issues that the builder is still obligated to fix.
The bottom line
A property inspection is not about checking boxes. It’s about understanding risk, timing, and cost. Investors who treat inspections as a formality often pay for it later through unexpected repairs, insurance problems, and disrupted cash flow.
The difference between a good deal and a bad one is rarely what’s visible on day one. It’s what fails in year two, year five, or year seven—and whether you planned for it.
If you’re buying multifamily, commercial property, or even new construction, inspections should be a strategic tool, not a procedural step.
For help with multifamily strategy, due diligence, or investment guidance, reach out to Jack Patel
Tony Escamilla’s contact information: https://inspectaproperty.com/
