Due diligence is basically just an evaluation of the property to make sure that it’s not going to fall apart the day after it’s purchased and that everything is sturdy and doing well.
What we do is a very rigorous evaluation. We get things like zoning reports, to see what can be done with the property. This is because some multifamily units are on a large piece of land.
Some of that land can be converted into building additional units, which can really increase the value. Another option is that we can put some storage units on there, some kind of a small park, or maybe even a cell tower. Some of the space can be rented.
In addition to that, we also get an appraisal report. That’s great because the appraisal report really shows us how much value is already inherently in the property.
Then we get what’s called an Engineering Report. The Engineering Report will basically go through the appliances and the plumbing, and the structural integrity. Sometimes, we’ll even take a scope and put it into the plumbing to take a look, to make sure that the plumbing is good and not blocked and it’s not going to backflow.
We also get a contractor to take a look at the property, see what can be fixed up – what needs to be updated. Maybe some of the structure’s out of date, and it needs to be enhanced. That’s important to look at as well to get an accurate evaluation. Then we also check and see if the roofs are flat or if they’re pitched, because flat roofs will have more leaks.
If the terrain is on a slant, we want to make sure that the terrain isn’t going to cause flooding or water to constantly backflow, and then eventually hit the building.
Aside from getting all the reports, we also do a double check by doing an interior evaluation through each property, to take pictures and to see how they look.
In addition to the property evaluation. We go through and talk to the tenants. We want to see what they need and what they really would value the most. We ask and see, if rents were increased, what would they be okay with? Some people will say they’re okay with a rent increase as long as we can fix this or that. And it could be the smallest thing that you’d never even think of, but the tenant cares about it.
Maybe the mailboxes need to be changed. Maybe the pool needs to be cleaned out, or maybe the tennis court can be repaved. It’s the smallest things sometimes that really add value.
We usually get this kind of great information from surveys. It comes from the tenants. It’s part of what makes all of this such a great investment.
Reach out to us and we’ll let you know what properties are available to invest in, and answer any questions you have about multifamily property investing.