Due diligence checklist

[Michael Whitman]

We're in the process of evaluating a multifamily near where one of my sons attend college.  On paper, the numbers work, it currently has renters in place, although month to month and one unit is actively trying to move somewhere else because they need more space. 

As I start to gather my thoughts on next steps, one that came to mind is my due diligence questions.  I'll be honest, this is the point I would normally get cold feet and pass on an opportunity. But, this community has been great in sharing advice, so we're going to dive a little deeper into this.

What are some of the due diligence questions you like to ask?  I think I have the basics down:
* rent roll or proof of rental payments over x period of time
* copies of owner paid expenses
* copies of owner repairs over the last couple of years
* clean title search
* home inspection

What are some of your favorite questions? I'm sure I'm missing some and I'm sure there are others who could close a deal and not worry about it.  For our first property, I'd like to make sure I'm thinking this through the right way.

Thanks all!

[Keyano Burgess]

Hi Michael,

You have pretty much all of your bases covered! As an investor-focused agent in the Cleveland market I always have my clients write the following contingencies in when buying a house that's tenant occupied:

1) Offer contingent on home inspection- usually a 7-10 day contingency period, this contingency allows you to either A) move forward with the deal B) renegotiate the price if issues are found, or C) walk away from the deal

2) Offer contingent on appraisal if you're going financing

3) Seller to provide copy of current lease agreement

4) Seller to provide a rent roll/tenant ledger with proof of payments received

5) Seller to provide copies of 3 previous months of any utilities paid by the landlord

6) Seller and tenants to fill out Estoppel Certificate. An estoppel certificate is a form you have the tenant sign that confirms their lease start date, the amount of their security deposit, and other things. It is a very good idea to get signed so everyone is on the same page.

Good luck with your investment endevears and feel free to dm me if you have any questions!