Due-diligence is vital to any property purchase. It allows prospective investors to access the property, inspect it thoroughly for any defects, and verify the available documentation, before signing on the dotted line. Due diligence before acquisition of any property enables you to make informed calls on whether the property justifies the quoted price. In this blog post, we have enumerated various checks that are performed during residential & multifamily due diligence services. Take a look.

1. Proofread the Documents

First and foremost, request and review all documents thoroughly for any contingencies.  Documents such as property deed, insurance, and copies of all previous tenants’ leases often reveal a lot about the authenticity and viability of the property. In case, the seller is unable to produce these documents, consider it a risky proposition. You must also ask for additional documents that sellers don’t make readily available such as the land survey report of the property, that  confirms whether or not the property has any boundary issues with the neighbors, regarding fences or driveways.

2. Physically Inspect the Property

Performing a physical inspection of the property before its purchase, often uncovers critical information including any upgrades or safety concerns that the sellers want to pass off.

Details such as a missing smoke detector, or faulty appliance fittings can be an important factor when it comes to negotiate the finer details of the purchase. During inspection, you can take help from a multifamily residential due diligence management company and a reputable renovation contractor, during the inspection, to look out for major features of the house that can go wrong. Primary areas of the property that you need to inspect are the roof, foundation, structure, boiler, and the fire alert system installed.

Related read - Due Diligence: A Cornerstone of Multifamily Property Renovations

3. Review the Finance Investments

Getting all the ducks in a row, regarding the financial aspects of the purchase is very crucial. You need to be on top of the information regarding the lease review, utility bills, and real estate taxes, before you close the property acquisition. You should ask for the copies of the leases and for factors such as the rent amount paid by previous tenants, and the security deposit. You should also seek the utility bills of the property for the entire previous year, to be sure of the fluctuations in utility costs for all seasons. Finally, you must confirm the latest real estate tax levied on the property because many sellers provide obsolete details and can blindside you on the deal.

4. Understand Claims Preservations

There are instances where sellers misinform you about the insurance and capital expenses for the property, that can hurt you later, once you have purchased the property. You need to ask for the insurance policy documents from the sellers, and get them reviewed from your preferred insurance provider for the correct number. You must also procur documents regarding any capital expenses done previously such as roof replacements, boiler repairs, and areas of asset repositioning. This factor often goes unnoticed for long before you actually have to get them done yourself.

Related read - 5 Valuable Pieces of Information You Discover with Due Diligence for Multifamily Property

Wrapping Up

Performing due diligence is the key to long term sustainable investment returns. Not only does it helps you assess the property for its contingencies and true price value, it also prepares you for any capital expenses that you might have to incur later. Multifamily & residential due diligence services also help you get a better deal on the investment.