If you’re investing in multifamily properties, one of the keys to success with earning passive income is due diligence.
Due diligence means taking the time and effort to thoroughly investigate a multi-family property before you invest in it.
Although it may seem easy on the surface; due diligence is a process that needs to be followed correctly every single time. This is why, in this article, I’ll provide you with the most important steps that you need to follow to successfully take care of due diligence before investing in a new property.
Step #1 – Market Survey
Market surveys are important, especially when you’re investing in a multi-family property in an unfamiliar area.
Some of the things that you want to consider when doing a market survey include the state of the local economy, jobs market, crime rate in the local area, demand for rental properties, and what comparable properties are renting for based on their occupancy, amenities, unit type and size.
Remember to never invest in an area without doing the market survey first because many cities have changed over the last 12 months.
Due to issues like defending local police departments, and social unrest, some cities that were once perfect examples of safety and security are no longer what they once were.
Since you’re going to be purchasing a multi-family property in the Covid-19 era, another important thing that you need to do is find out which businesses in the area have closed recently, and which businesses are currently reopening.
Covid-19 has changed the world and because some businesses have been forced to close over the last year, this may affect the desirability of an area, especially if there are fewer shops, stores or restaurants in the area than before.
Step #2 – Property Condition Assessment
Let’s say that you’ve taken the time to thoroughly investigate the area and you found that it would be an ideal place for investing in multifamily properties.
After you have found a multi-family property that you’re interested in investing in, the next step is to assess the condition of that property.
The first thing to do is to hire an inspector to thoroughly inspect the exterior of the property and each unit individually.
During the process of inspecting each unit in the multifamily property, you should also take the time to speak with every tenant to find out their experiences living in the property, especially if the building has deferred maintenance which the current owner may not have brought to your attention.
Having a complete inspection is important because you want to also know if the property currently meets health, safety, and fire codes, or if it’s going to need work before you can have the property in rent-ready condition.
What happens if the property is not in rent-ready condition? In this case, you may be able to take the property condition report (PCR) and use that as leverage to get the current owner of the property to lower their asking price or you may want to just walk away from the deal altogether.
Always make sure that the property that you invest in makes good financial sense and is going to cash flow every month. Many Real Estate Investors get too emotionally involved. This is critical because you don’t want to add to your current stress level by investing in a property that’s going to leave you upside down financially.
Step #3 – Environmental Inspection
Besides having the property inspected, another important thing that you want to do before making an offer is to have an environmental inspection.
Environmental inspections are very important because this part of the inspection process is going to tell you if the property has any hidden health hazards that need to be eliminated before the property can be considered to be in rent-ready condition.
Some of the most common health hazards in older multi-family properties that ultimately affect an owners’ ability to earn passive income include lead paint, asbestos, underground oil tanks, or if the property was constructed using other materials that are now considered to be hazardous.
Step #4 – Financial Assessment
Last of all, but most important, another key thing that you want to do before purchasing a multi-family property, especially if your goal is to earn passive income from that property in 2021 and beyond, is to do a financial assessment.
This means that you’re going to request a copy of the property’s rent roll, property tax information, bills, and other expenses.
Even though the current owner may be telling you that the property is in excellent financial shape and cash flowing every month, don’t take their word for it, take the time to thoroughly investigate what’s going on with that property financially before you decide to commit to purchasing it.
Earn Passive Income In 2021 With Trier Capital
2021 is off to a booming start, the economy is growing, the stock market is at an all-time high, mortgage interest rates are predicted to stay low for at least the next two years, and the demand for multi-family rental properties has never been better.
If you’re an accredited investor who has the goal of earning passive income from multi-family properties in 2021, and Beyond, but you don’t have the time or energy to invest in multifamily yourself, I invite you to partner with me.
My company specializes in sourcing, acquiring, and managing multifamily properties across the United States.
Over the years we built a successful portfolio of multifamily investment properties for our investors which enables them to earn consistent passive income every month.
Our simple step-by-step process allows you to accelerate your wealth creation so you can live a magnificent life on your terms, whether that means traveling the world, spending more time with family and friends, or making an impact.
To learn more about the benefits of partnering with us, contact me today by calling (630) 229-2383 or click here to connect with me online.