Are you searching for a due diligence checklist? Due diligence is one of the most important parts of multifamily investing because it’s what’s going to give you confidence that you’re investing in the right multifamily property.
If you’re unfamiliar with due diligence, this article provides you with 10 things that you should check before investing in a multi-family property.
Due Diligence Checklist
As with anything else that you may have invested in in the past, the most important thing to look at before purchasing a multi-family property is what the property operating statement is from the last 12 months.
By viewing the property operating statement, you will be able to tell how the property is done over the last 12 months and see if there have been any seasonal fluctuations that could affect the passive income that you earn from the property.
Investigate The Rent Roll
After reviewing the property operating statement, the next thing that you want to review is the rent roll.
The rent scroll is the schedule of rents and it shows the amount of money that’s due from each tenant every month.
By reviewing the rent roll, you’re also going to be able to tell how long a tenant’s lease is currently for, and you will have a good idea of the income that you can expect to earn from the property over the next 12 months.
View The Real Estate Tax Bills
Make no mistake about it, the income that you earn from multi-family is fantastic but, it’s also important for you to know what you can expect to pay in property taxes on an annual basis.
During the process of due diligence, you want to investigate the current and prior year’s property tax bills. You should also investigate when those bills were paid as well just to confirm that the property is current on property taxes.
Inspect Copies Of The Leases
The next step on your due diligence checklist is to obtain copies of leases for the multifamily property. This step is important because it will provide you with the details of each list, especially if there are leases that are month-to-month.
Find Out What Services The Property Currently Has
Another important thing to do during the process of doing your due diligence is to find out what services the property currently has, especially if some leases or contracts need to be renegotiated or eliminated.
Inspect The Property
Once you confirm the services that the property currently has, the next thing to do is hire a property inspector and have a full inspection done of the entire property.
The property inspection should include the exterior, common areas, and utilities. Once these areas are inspected, the next thing that you want to do is to have each unit inspected as well.
Inspecting each unit is vital because if there may be one or more units in the multifamily property that need renovation before they can be considered to be in rent-ready condition.
Request Contactor Quotes
After the property has been inspected, you’re going to know if needs work, especially if there are deferred maintenance issues that need to be addressed.
Instead of requesting one quote, make sure you request multiple contractors quotes so that you can have confidence that you’re getting the best deal on the renovation work that your property needs.
Do A Market Analysis
Now we get into the ‘nitty-gritty’, the market analysis.
During the process of doing a market analysis, you should be analyzing the area so that you can learn more about what’s happening with the local economy, crime rate, schools, and other issues.
You should also learn more about the competition which may be nearby so you can find out what other comparable multi-family properties are renting out units in their buildings monthly.
Get An Environmental Report
Environmental reports are important because they will tell you if the property was constructed using now hazardous materials that need to be replaced before the property is in rent ready condition.
Last of all, but most important, as you wrap up your due diligence checklist another thing that you want to do is to find out if there are any delinquencies at the property that you should be aware of.
If there are multiple units at the multi-family property are currently delinquent, this should give you a clue that you may be off to a challenging start. It’s best to verify what those delinquent amounts are and find out what the cause is behind the delinquencies before you move forward with purchasing property
Contact Trier Capital
At Trier Capital, we are a private equity firm that makes it easy for you to passively invest in lucrative apartment building syndications.
With our simple step-by-step process, you can accelerate your wealth creation and live a magnificent life on your terms, whether that means traveling the world, spending more time with family and friends, or making an impact.
For more information about partnering with us, contact me today by calling (620) 229-2383 or click here to connect with me online.