No Comments

The Importance of Due Diligence in Multifamily

Due Diligence on Multifamily Purchase

What is due diligence? According to Investopedia, due diligence is defined as:

1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a sale.

2. Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a transaction with another party.

To many seasoned investors, this may sound like the “no-duh” reminder. Yet, we’re all subject to the ups and downs of real estate investing, and need to understand that many of the “downs” are well within our own control to prevent. For this reason, we’ve put together the following list of items every prospective multifamily property owner and/or investor should know:

  • Inspections—Do we really need to say it? Apparently so. You’d probably be surprised how many people forego inspections in order to save just a bit. They, however, tend to pay dearly in the long-run. Don’t try to save when it comes to verifying the viability of your property. Invest more, in fact. Pay a professional roofer, plumber, general contractor, HVAC specialist, and foundation expert to come give their two cents. You’ll be grateful you did.
  • Condition and repairs—Yes, there is a difference in these points. Once you’ve determined the steadfastness of the structure and its components, it’s time to be reasonable about what it will take to get the property ready-to-rent. How are the blinds? How dated are the appliances and fixtures? What does the paint look like? Bottom-line: What will it cost you to make the property attractive to the tenants most likely to seek you out?
  • Community and neighborhoods—Before you make a decision to purchase any multi-family property, do your research on the neighborhood and community. What are the demographics? How is the location? What are the local attractions? Even a cheap purchase price tag will not help you sell a property in a bad neighborhood that is inconveniently located.
  • The competition—Evaluating the competition is something every business owner should do before opening shop, regardless of industry. Multifamily is no different. What types of properties are in the general vicinity? What are the tenants like that rent there? What types of improvements have been made? What are they charging for rent and deposit? And, most importantly, what will it cost you to position your property to effectively compete?

Start out on the right foot with a property management company in your corner that knows all the ins and outs of effective due diligence. The professionals at Class A Management are ready to assist. Give us a call today at 817-295-5959, or send us an email to