Understanding the What, Why and How of Due Diligence for Multifamily Property

A multifamily property is a significant investment, so you need to pay attention to the research part before signing on the dotted line. This is where due diligence comes into the picture to help property owners save substantial repair and maintenance costs that could be the result of unknown construction defects. Due diligence assistance for multifamily property is the process to check and confirm that all the facts in a deal are as they have been represented by the seller.

 

Details & Highlights of Due Diligence for Multifamily Property

Why Do You Need Due Diligence?

Some of the benefits of due-diligence are:

 

Ask For Quotes

It’s time to contact your network, post advertisements, and do all that you can to reach out to some of the best multifamily property contractors in your area. Ask all contractors to send in their quotes and compare them all to shortlist the ones you think are offering a good ‘price to value’ proposition. One quick tip – While budget might be a constraint, make sure you don’t choose a multifamily housing services company just because it is the lowest bid.

 

1. Identifying Existing Issues

Due diligence enables the buyer to evaluate existing issues with the multifamily property and predict the ones that might come up in future. The process makes it easy to come up with a renovation plan and determine cost based on the priority and profitability criteria.

 

Useful read – Due Diligence: A Cornerstone of Multifamily Property Renovations

 

2. Scheduling Renovation

A schedule is created to ensure availability of manpower and resources for renovating the multifamily property. Seasonal fluctuations and other setbacks that might appear during renovation are also considered to determine a deadline for the project.

 

3. Determining the Cost

Due diligence helps in determining the approximate cost of renovating the multifamily property. The cost may vary in some scenarios, but the difference would not be too big. Cost evaluation helps in finding out the financial viability of the multifamily property investment.

 

What to Consider?

Some of the critical areas to consider when performing due diligence on a multifamily property are:

 

1. Lease Audit

There could be a discrepancy what is shown and what actually exists. Multifamily property sellers might claim to be receiving more rent than they actually are, and this is why you need to consider performing a lease audit.

 

2. Unit Inspection

Inspecting every unit in a multifamily property is a must to find out their condition, repair requirements or safety concerns.

 

3. Rent Comparison

Rent comparison analysis gives an overview of the similar properties that are in close proximity and how much rent they charge. If there are multifamily properties in the area with higher rental value, look for the amenities they offer and the feasibility of performing upgrades in the property that you intend to purchase.

 

Useful read – 5 Valuable Pieces of Information You Discover with Due Diligence for Multifamily Property

 

4. Utility Bills

Check the utility bills of last 12 months for any delay or pending dues. This will also help you in finding out if the utility cost fluctuates through all the four seasons.

 

How to Go About It?

Due diligence involves inspection, evaluation and assessment at multiple levels. Here are the steps involved:

Step 1 – On-site evaluation

Step 2 – Estimating cost, time and resource

Step 3 – Documentation check

Step 4 – Renovation work scheduling

 

Wrapping Up

Due diligence is time intensive and if you are not familiar with all the aspects of the process, it is always better to turn to a professional. The experts at United Renovations Specialty Group will perform extensive due diligence to help you go ahead with investing in multifamily property and renovating it for value addition. For more details, fill out the contact form or call 866-333-5159.

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