Where To Go To Run Due Diligence On A Property?

Question

Hello BiggerPockets!

I just got under contract for a 6-plex with a reputable turn-key company who is very active on BiggerPockets.

I ran some numbers and used propstream and vestmap to get an idea of the demographic and properties in the area. Everything seemed to check out pretty good numbers wise and in terms of tenant pool.

I've been researching more on the particular zip code of the property in terms of BiggerPocket's opinions on it, and it doesn't seem promising. I want to know where else I can look to vet moving forward with this purchase. Right now, I am thinking of calling property managers to get their opinion of the area... But where else do you go to look online?

I also did a Google Maps Street View -- there are some run down houses next to it, but also a nice-looking freshly-renovated apartment complex on the same block.

I know this turn-key company is very reputable, so I trust their judgement... I am just concerned with my findings from BP on this zip code.

The zip code is 35205, Birmingham AL if anyone has experience with the area.

Thanks!

Joshua Espejo · Answer

Lee! So great of you to stop by. Thanks once again for your knowledge bombs! I'll add these to my criteria and hold myself accountable to take these into account for the next property.

Nothing is stopping me from pulling the trigger -- I am in contract and pulled on another investor to get the funds going for this one.

As part of due diligence, I always look at BP to see what's being said about a particular zip code. Wasn't seeing too many great things about the surrounding zip codes... but it *appears* zip code is an oasis ... the numbers and statistics on Vestmap (thanks!) support it. Overall feeling pretty good about moving forward.

After this property, I am moving into 100+ units for commercial Multifamily, with the help of a new mentor who has experience in the space.  For the bigger Multifamily, I will be raising funds and putting together investor packets that describe the deals I will be putting together. I'd love for you to take a look when I have one prepared :) I'll be in touch. Thanks again, Lee!

Caroline Gerardo · Answer

https://www.unitedstateszipcod...     65% rental vacancy

https://crimegrade.org/propert...   D for crime

I don't know the address, square footage, condition, cost of improvements, why they are selling...

Joshua Espejo · Answer

Hell yeah man! I am stoked for you!

Do you have any properties in mind already? Or what about certain zip codes/areas?

Single fam? Multi-fam? Do tell.

Lee Ripma · Answer

@Joshua Espejo

Sounds like you did a lot of due diligence and it works for you. Everyone has different criteria for what they are looking for. I look at the DISCERN criteria for each location. I have included what I am personally looking for to be helpful. Remember, everyone has different criteria. No right or wrong, lots of ways to make money in RE!

D - Demographics: variety will work although there a few I avoid with market-rate tenant strategy but will include with Section 8 tenant strategy

I - Income: for market-rate tenant strategy I'm looking at median household income at the location to be 28k/year or greater regardless of the unit size. Think about target rents on your property in relation to this income. 3x is the usual rule. So if you want 750/mo then 3x would be 27k/year. If you want 1200 then you're proably want to go higher 1200x12x3=43.2k.

S - Schools: depends on the unit size. For smaller units I am not looking at the schools, for larger units I am looking at schools. Middle of the road or higher, so 4+ score in general when I'm doing larger units. If tenants won't have kids (smaller units) it does not matter what the school ratings are, they won't care.

C - Crime: I will take a variety of crime scores. If I'm at 3.5x I do a few extra things like cage AC units. Most of my units are usually 2-3.5x the national crime scores.

E - Expansion: Stable or growing population. No declining populations ever, period. Increasing median income as well.

R - Rent: Make sure whatever this median value is jives with your underwriting on the deals. I usually target above 750/mo regardless of unit size.

N - Neighborhood: Something to take a look at, love it when a starbucks is the nearest store but a variety of nearby stores will work. Always take a look at nearby businesses to a property. These business are local so you'll need to do a little manual work here.

What is stopping you from pulling the trigger? Do you not know what you're looking for? As the saying goes, if you don't know what you want, then anything will work!

Evan Holly · Answer

Being new to this, I want to check the city out first.  Headed there in a couple weeks.  Stoked!

Joshua Espejo · Answer

Thanks for the rundown, Evan! I'll call a few PM's tomorrow including Rudy, just so I can get a decent idea from a few PM's in the area.

What's holding you back from pulling the trigger brother?

Joshua Espejo · Answer

Awesome bro, thanks for the offer. Would you happen to know this specific area or around it? It seems like its surrounded by D and F areas, but seems to be a safe spot in the middle? I am hoping at least!

Jordan Smith · Answer

@Joshua Espejo I live and attend school very near this zip code. Like much of the Birmingham area, there’s decent variation within the zip code. Feel free to contact me if I can help in any way.

Evan Holly · Answer

@Joshua Espejo I’ve yet to invest, but Birmingham is where I’m planning to start.  That specific zip is solid from property managers I’ve talked to in the area, it being right by the college.  Give Rudy a call at https://www.rudulphrents.com .  They manage properties in that zip.