7 Keys To Great Due Diligence On Your Next Investment PropertyMar 20, 2023
Due diligence is the process of thoroughly evaluating a multifamily property before making a purchase. It is an important step that can help you make an informed decision about whether the property is a good investment and can help you avoid potential problems down the road. Here are the steps involved in doing due diligence on a multifamily property:
- Review the property's financials: You will want to carefully review the property's financial statements, including its income and expenses, to get a sense of its financial health. Look for red flags such as declining occupancy rates, increasing expenses, or declining profits.
- Tour the property: It is important to physically inspect the property to get a sense of its condition. Pay attention to the condition of the units, common areas, and any amenities the property may have.
- Review the lease agreements: Carefully review the lease agreements for the units in the property. Look for any red flags such as below-market rents or unfavorable terms for the landlord.
- Check out the neighborhood: Research the neighborhood where the property is located. Look for trends such as rising or declining property values, new development, or changes in the local economy that could affect the property's value.
- Review the property's legal documents: You will want to review the property's legal documents, including the deed, any mortgages or liens on the property, and any zoning or building code violations.
- Consider environmental issues: Check for any environmental issues that could affect the property, such as contamination, flood risks, or hazardous materials.
- Hire professionals to help with due diligence: Depending on the size and complexity of the property, you may want to hire professionals such as an attorney, an accountant, or an environmental consultant to help with the due diligence process.
By following these steps, you can help ensure that you have a thorough understanding of the multifamily property you are considering and can make an informed decision about whether it is a good investment.
The information contained herein is for general guidance on matters of interest only. This information contained herein is not intended to provide you with any advice on financial planning, investment, insurance, legal, accounting, tax or similar matters and should not be relied upon for such purposes. M1 Real Capital Inc, Marcin Drozdz is not a financial, legal or tax adviser. You should assess whether you require such advisers and additional information and, where appropriate, seek independent professional advice. You understand this to be an expression of opinions and not professional advice. You are solely responsible for any actions you take with the content and hold M1 Real Capital Inc, Marcin Drozdz or any of his affiliates harmless in any event or claim.