Where To Go To Run Due Diligence On A Property?

[Joshua Espejo]

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]

Originally posted by @Lee Ripma:

@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! 

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!