The Ultimate Guide to Due Diligence

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Due diligence may be boring, but it’s absolutely critical to get it right.

Here we’ll take a deep dive into what is perhaps the least fun but most indispensable part of real estate investing: the dreaded due diligence.

What Is the Meaning of Due Diligence?

While an entire book could be written on all the ins and outs of this subject, the definition of due diligence is rather simple. It’s the “investigation or audit of a potential investment or product to confirm all facts,” according to Investopedia.

Basically, the purpose of performing due diligence in real estate is to confirm what you believed to be true about a property when you got it under contract.

While it can be arduous, following the steps outlined below will help you avoid any unwanted surprises and greatly increase your confidence in the investment. And what do new investors need more than confidence?

Checklist: The Process

Performing due diligence can be broken down into several distinct stages.

  1. Pre-Offer Due Diligence
    1. Area Analysis
    2. Value and Financial Estimate
    3. Rehab Estimate
  2. Post-Acceptance Due Diligence
    1. Physical Due Diligence
    2. Financial Due Diligence
    3. Legal Due Diligence
    4. Inspections
  3. Retrading (if necessary)
  4. Final Decision and Walking Away (if necessary)

Use this as your due diligence checklist. Make sure you never to skip a step! Note that while there are differences in how to approach houses and apartments (as well as commercial), the fundamentals are the same.

Let’s take a closer look at each part.

Pre-Offer Due Diligence

Area Analysis

Before any analysis of value should be done, you want to make sure the area you’re looking to invest in meets your criteria. Some of the most important things to consider are:

  • Crime Rate
  • Median Income
  • Occupancy Rates
  • Population Growth
  • School Rankings

People generally want to avoid high crime areas, and families are extremely particular about which school district the home is in. If you intend to invest in low-income housing, that’s one thing. (In my opinion, newbies should shy away from this sort of investment.) Regardless, you should know what you are getting into before you buy.

Fortunately, there are some very good free sources you can look to for information (in addition to just talking to people in the neighborhood). and are good for demographics, and can help you evaluate the school district. There are also more advanced, albeit expensive, tools available.

Value and Financial Estimate

The next step is to determine a property’s after repair value (ARV). This is best done by looking at comparable sales. I won’t go into too much detail here, but a wealth of ARV guidance is available on BiggerPockets.

Related: The Ultimate Guide to Quickly Estimating a Property’s ARV (After Repair Value)

You will also want to make sure the property will cash flow by creating a pro forma. This is particularly true for multifamily properties but is helpful for houses, too.

Review the actual financials of those properties (particularly the T-12 operating statement) as seller-provided pro formas (future estimate) are almost always too optimistic. The best way to create your own pro forma is to base it off the property’s actual performance.

With regard to pro formas (at least for apartments), you will have three income categories and 10 expense categories:

Income Items

  • Gross Rental Income
  • Other Income (i.e., laundry, utility chargebacks, late fees, etc.)
  • Vacancy Loss (include both vacant units and economic vacancy)

Expense Items

  • Property Taxes
  • Insurance
  • Utilities
  • Management Fee
  • Repairs and Maintenance
  • Contract Services (i.e., lawn care, snow removal, etc.)
  • General Administration (i.e., phone lines, eviction processing, etc.)
  • Marketing
  • Payroll (for larger properties with on-site staff)
  • Recurring Capital Improvements (i.e., roof replacement, HVAC replacement, etc.)

Related: Building a Pro Forma: an Essential Skill for Real Estate Investors

After subtracting the gross expenses from the gross income, you will get the net operating income. From this, you subtract any debt service you expect to have in order to come up with the anticipated cash flow.

It should also be noted that, with apartments and commercial properties, you will use the cap rate to compare to other recent sales. Why? Because it is usually too difficult to find properties that are similar enough for a direct comparison.

More on cap rates and other financial calculations can be found here: A Guide to Internal Rate of Return & Other Must-Know Financial Metrics.

Overall, your pro forma will look something like this:

Finally, you’ll want to evaluate the rent. is a good place to start but shouldn’t be relied upon exclusively. In addition, offers helpful reports for a reasonable fee.

But I’ve found the best way to assess rent is to look at the map feature on Craigslist or Trulia for similar properties that are for rent in the area. Calling the numbers listed on lawn signs of nearby rentals or asking neighbors what they pay can also help.

Rehab Estimate

There are simply not enough hours in the day, nor days in the year, to do a thorough inspection of every property you make an offer on. That being said, throwing out blind offers is usually a big waste of the seller’s time, as well as yours.

What you want is a “down and dirty” sort of due diligence pre-offer. The question to ask is, roughly speaking, what is the general condition and an approximation of the required repairs for this property?

For this, I designed a one-page estimation sheet based on J. Scott’s The Book on Estimating Rehab Costs. Typical rehab expenses are broken into 25 categories; however, I added a 26th by splitting the foundation from the basement. Here is what my sheet looks like:

performing due diligence using property analysis spreadsheet

As you can see, when I initially go through a house, I make a quick estimate of all the repairs required for each major category. (For apartments, depending on the size, I will either use several sheets, or for something over four units, take broader notes about the general condition.)

Then, I add a little bit for the knickknacks, estimate the holding costs (which are often forgotten), and throw in a 20 percent contingency for unforeseen expenses. (If the electrical looks questionable or the property is older, I may throw in an additional contingency for the electric and/or sewer line.)

I should stress that this is not the only way to do this. There aren’t any real estate dictionaries that define due diligence by laying out the perfect method to go about it.

For example, J. Scott doesn’t add a broad contingency. Instead, for each line item, he rounds his “estimate up to either the next $100 or next $500 (depending on how big the expense is).”

The important part is to get the basic idea of due diligence and create a system that works for you. Then, use that system every time to the T.

Key Things to Look for When Estimating Rehab Costs

There are a lot of things to look for when doing your initial (as well as post-contract) walkthrough.

The first thing is to simply get a good feel for the property. Would you grade it as being close to rent ready or bulldozer bait? Maybe somewhere in between? You should always note a property’s general condition.

More specifically, the following items should be on your radar:

  • Furnace and A/C: Are they old or rusty?
  • Fuse Box: These really need to be replaced with an electric panel.

fuse box in need of updating

old circuit breaker that poses fire hazard discovered during property inspection

outdated electrical panel

old electrical panel found in property walkthrough

  • Ungrounded Electrical Outlets: You can use a plug tester from Home Depot or Lowe’s to test for this.
  • Plumbing Leaks: Run the water, check each of the faucets, and look in the basement (if accessible).
  • Galvanized Plumbing: Lookout for steel pipes, which have a tendency to rust.
  • Foundation Cracks: These could be signs of bad grading or roots pushing on the wall and should be epoxied and likely shored up with braces.

cracks found in foundation found during inspection

  • Foundation Movement: Anything over four inches should probably be braced or have dead men added. Much more than that and the wall might need to be pushed back, which is very expensive. (Pro tip: If you can’t tell how much the wall has moved, go outside and run you finger along the bottom of the siding. It should go about to your knuckle. But just running it along the foundation wall should give you an idea of where and how much the wall has moved.)
  • Mold: This usually occurs in the basement. Also look for the bottom half of the drywall missing (like in the second picture below). This virtually always means mold was torn out. Mold isn’t hard to remove, but the key is to find out where water is getting in so new mold doesn’t grow back. This could be easy or very difficult, depending on the house.

mold discovered during inspection

bottom portion of drywall removed due to mold

  • Roof Leaks or Damage: It will be hard to tell if the roof leaks unless it’s raining, but you can see damage by getting on the roof. How many layers are there? More than one is a problem. Check from a side view, too. If the edges of shingles are lipping up, that means the roof’s old and on borrowed time. If you see what look like small, discolored impact craters on it and granules are missing, that’s probably hail damage.

roof damage found when performing due diligence

Help With Estimating Rehab Costs

Unfortunately, learning how to estimate rehab costs isn’t an easy thing to do. And doubly unfortunate, the best way to learn is through experience.

I’ve found that comparing the costs of previous projects that were of equivalent size is the best way to get a feel for the costs of upcoming projects. This goes for individual expenses, too, like gutting a bathroom. Newbies don’t have this luxury, though.

In the meantime, one of the best alternatives to experience is to use contractor bids to get an idea of various costs. For instance, a standard toilet is around $150 and a standard medicine cabinet will cost around $100. You’ll start to learn this as you look at more and more bids.

You can ask a contractor to give a you bid up front, and many will do so. But don’t abuse this privilege—they’ll quickly stop returning your calls if they don’t get any actual work from you.

You can also ask seasoned investors to share their thoughts. (Maybe offer them a free lunch for it.) Plus, J. Scott has some good tips in his previously mentioned book. There are also websites like that can help—although their estimates should be taken with a grain of salt.

Post-Acceptance Due Diligence

When people think of due diligence’s meaning, this is what they really think of. Post-acceptance due diligence is when the rubber hits the (very tedious) road.

First and foremost, it’s critical to understand the timetable you’re under, which depends on what’s in the purchase and sales agreement.

Every contract is negotiable, but most residential contracts have a 30-day period to close and will allow 15 days for inspections before your earnest money “goes hard” (is no longer refundable).

With most contracts for apartments and other commercial properties, there is a 30-day inspection period and the close is in 60 days. However, it’s possible to add a clause that extends the contract an additional 30 days with another earnest money payment, just in case. I would recommend adding something like that, particularly for larger transactions.

You can always ask for extensions if something comes up during your due diligence (although you may not receive them without a clause like the one mentioned above). The critical thing is to know exactly what the contract says so you can plan your due diligence accordingly.

Physical Due Diligence

First things first. When you walk a property, walk all of it. As I mentioned in a previous article on apartment due diligence,

“Many sellers and even some real estate agents will tell you it’s OK to walk every second or third unit. Ignore this “advice” with extreme prejudice. If you only view every other unit, do you think the seller will show you the best or the worst units? How many hidden problems are you leaving behind closed doors, only to find out later once the property is in your name? It is critical to know the condition of each unit, even if there are 100 of them.”

In order to do this properly, you will need to turn the utilities on if they are currently off. This is not always possible (say, if the copper was stolen out of the basement). In those cases, make sure to add an extra contingency in your rehab budget to protect yourself from unknowns.

When going through a house, I use the following sheet to put together a detailed scope of work that includes every line item I believe will need to be done. The document is six pages in its entirety, but here’s the gist:

checklist of repairs for real estate investment property

I then transcribe these items and budget them individually using a spreadsheet program designed for project management. It ends up looking like this:

list of needed repairs after auditing home

I break out the categories into four major subheadings:

  • Pre-Construction Work: Work that must be done before the main work can start (i.e., removing trash or repairing electrical issues).
  • Construction: Everything you plan on having done by the main contractor.
  • Vendors: Anything that will be done by a vendor other than the main contractor (i.e., painting, flooring, plumbing, etc.).
  • Punchout: Last items to be done to button up the property (i.e., install appliances, put up blinds, install outlet covers, etc.).

I recommend taking pictures of each issue. The project management software I use (called Smartsheet) even allows you to attach the photos to that item’s cell within the spreadsheet.

This way, I don’t have to be there when each contractor goes through to create a bid. I can show them photos of the issue instead. Here’s an example of a picture I attached to a line item called “Replace supply vent – white.”

old vent in need of replacement

Once you have a detailed scope of the work that’s needed, it’s a good time to re-assess your rehab estimate.

Budgeting for each line item provides a much fuller picture of the costs. Then, you can compare the new budget to the previous “quick and dirty” estimate to double-check whether it was right. And with the property under contract and a line-item scope, you can ask a contractor to get a full bid for you to verify your estimate.

I must once again emphasize that there is no perfect way to do this. For example, if the contractor will do all the work, you won’t need a vendor list.

But the method I’ve described fits within a general outline of an effective system. Amend it to fit your own needs and follow it dutifully.

Now, returning to the walkthrough, you should also evaluate anything you questioned during your original pre-offer walkthrough and make sure it is up to snuff. This likely requires paying for professional inspections (discussed below).

Finally, evaluate the tenants, if there are any.

If you encounter a lot of meeth (what I call meth teeth), that’s something to be concerned about. If the house or several units of a property have been treated horribly by the tenant, you can surmise the quality of that tenant quite easily. For apartments, I also recommend driving by at night to see if it looks safe and tranquil or more akin to a war zone.

Here’s a “tenant watching” example of proper due diligence that comes to mind.

Once, a friend of mine was walking a fourplex just before the close. He got into a conversation with a neighbor about the property, and it turned out she had a lot to complain about! Most notable amongst her complaints was that she’d gathered many of the tenants were drug dealers and prostitutes.

Needless to say, my friend walked away from that deal.

The key takeaway? Yes, talking to tenants and neighbors is a good idea.

The seller will usually not want you to mention you are buying the property, but you can ask broad questions like, “How do you like it here?” Or say, “Have you had any maintenance problems?”

Financial Due Diligence

Just as important as the physical due diligence is the financial due diligence. This is especially true of apartments and commercial properties, but it is also something you should look for with occupied houses.

Sometimes, a seller won’t provide some or all of the financials on a property until after it’s under contract.

The seller is all but begging for you to retrade in these cases (discussed below), but you should absolutely demand the financials once the property is under contract. When you receive them, go through them with a fine-tooth comb.

The key documents you will want are:

  • T-12 Operating Statement: Minimally for the past 12 months—particularly for apartments—but preferably for the last three years.
  • Current Rent Roll
  • Aged Receivables Report: A list of who’s behind on their rent and by how much.
  • List of Recent Capital Improvements

There are two major things to watch out for when reviewing financials, specifically with larger properties:

  1. Bad Debts
  2. Misallocated Capital Expenses

If a property uses accrual accounting, then it is deemed that all the rents are received until the bad debts (rent not collected) are charged off. Make sure that all the debts have been charged off when reviewing financials and you aren’t looking at phantom income.

The bigger problem I’ve found, however, is misallocated capital expenses. Many owners will put operating expenses (i.e., maintenance, turnovers, etc.) under capital expenses so they don’t show up on the operating statement. This makes the property’s performance look a lot better than it actually is.

For this reason, I plead with new investors to consider recurring capital expenses (usually called “replacement reserves” by banks) as a line item on their pro formas. Yes, you only need to replace the roof once every 30 years or so, but you should understand such costs are an ongoing part of owning the property.

Make sure to demand a list of all the owner’s capital improvements in the last year (or, even better, the last three years) and their costs. Unless they were genuinely upgrading the property (i.e., installed central air when it previously had window units) or were rehabbing an underperforming property, these expenses should be considered recurring capital expenses and included as part of the profit and loss statement.

Many a time I have had to reconstruct a seller’s operating statement from the various pieces they’ve provided (which are often poorly kept in the first place). It’s no fun, but it is essential!

When performing due diligence, you’ll also want to get a copy of each lease that’s currently in place. Make sure to demand this immediately upon getting the property under contract—sellers notoriously drag their feet.

You’ll want to carefully look at the following:

  • Rent: Make sure it’s the same amount listed on the rent roll.
  • Type: Month-to-month or a year-long lease? When does that lease end?
  • Deposit: Again, make sure it’s the same as what the rent roll says.
  • Utilities: Who is responsible for paying what?
  • Pets: Do tenants have them? Is there pet rent?
  • Late Fee: When is it applied, and how much?
  • Special or Odd Arrangement: Do any tenants get a discount for doing maintenance or something similar?

If you’re under contract on a commercial property (office, retail, or industrial), you should also get an estoppel certificate. An estoppel certificate goes to the tenants of the building and asks them to confirm the rent, deposit, and other terms of the lease.

With commercial properties, you usually only have a couple of big tenants who often have long leases, so it’s very important to know exactly what the terms of the agreement are.

One final note is that, oftentimes—particularly with houses—there won’t be much (if any) financial due diligence to do. If it’s a vacant, bank-owned house for example, there won’t be any documentation to review. In those cases, just double-check your area, rent, and ARV analysis, and move on.

Legal Due Diligence

Let’s start by discussing homeowner associations (HOAs). Many houses and all condos have HOAs, and you will want to review their bylaws to make sure they’re in accord with your plans.

In the case of condos, you will also want to make sure the HOA has sufficient money in reserve for capital improvements. If they don’t, the association can impose a special assessment and charge owners a portion of the cost to cover repairs.

Key things to look for in the HOA bylaws include verifying that the HOA fee is what the seller says; checking that there aren’t restrictions on pets or other such things; and, most importantly, ensuring that you are actually allowed to rent out the property.

I once bought a condo in an HOA that didn’t allow renters. I had requested the bylaws but never received them and foolishly forgot to follow up. We had to flip that one and made a “healthy” profit of $1,700. (HOA fees can eat up profits like you wouldn’t believe.)

Another consideration: is the property odd in some way? For example, is it a house that was converted into a duplex?

If the property is odd, you will want to verify that it is legally permitted. Ask if conversions were done legally. If not, it may be “grandfathered in” and considered “legal nonconforming.”

This classification shouldn’t necessarily be a deal breaker, but it can come with added restrictions and/or decrease resale value. Laws vary by region.

In Independence, Mo., for example, any legal non-conforming unit can continue to be rented unless it sits vacant for six months, at which point it can no longer be rented.

If you intend to add more units or convert the property (say, from residential to commercial), check to make sure the property is zoned correctly or whether it can likely be rezoned. This may require a trip to the zoning department.

In addition, verify property taxes with the county. Usually you can do this on the county’s website.

Finally, it is critical to always close with a lawyer or title company. They will run a title report to make sure you are getting a clear title—not picking up some random mortgage or mechanic’s lien from way back when.

If a lien is overlooked, title insurance will pick up the tab so you don’t have to. Again, there is no gray area here. ALWAYS close with an attorney or title company, no matter what.


If you’re just starting out, in my opinion, always get a property inspection. Even seasoned investors would be wise to get them.

Property inspections can be a bore to read, but go through each point anyway. An inspection will look something like this:

siding rot on home noted during walkthrough due diligence

Some issues, like the above, are rather small. Others, like the one below, definitely need to be addressed.

electrical issue in discovered during real estate walkthrough

You shouldn’t rely entirely on an inspector either. As mentioned earlier, thoroughly walk through the property yourself, as well. But inspectors can certainly catch things you missed and will generally know a lot more about building and safety requirements than you.

Furthermore, inspections can be used to verify your rehab expectations, realize you need to look deeper into something, or be used for retrading. Many buyers demand a seller fix all or some of the problems an inspection brings to light before they are willing to close.

Additional inspections you may want to consider, depending on the property, include:

  • Lead, Asbestos and Radon Inspections: Lead inspections are only necessary if the property was built prior to 1978.
  • Termite Inspection: Particularly if you see signs of termite damage, like damaged joists or mud tunnels.

termite damage found during inspection

mud tunnels found during home inspection

  • Roof Inspection: If the roof is older, appears damaged, or you aren’t sure about it.
  • Phase One: Environmental survey required for apartments and commercial properties.
  • ALTA Survey: Usually for larger properties with unclear easements, boundaries, etc.

Unsure of something? Ask a specialist. For example, you could ask an HVAC technician to look at the furnace in a property if you’re unsure of its condition.

Lastly, get the sewer line scoped on any property over 30 years old. Replacing a sewer line can be an expensive proposition (usually over $4,000), so you want to find out whether the line has collapsed or is ridden with roots.

You should be able to get a plumber to scope it for around $200. Make sure to view it with them. Some will try to convince you to replace a line just because there are a few roots in it. However, these lines can be snaked out.

Either way, you want to know what you’re dealing with ahead of time. You’re not going to win the adoration of any tenants if they have raw sewage back up into their home.

When Is Retrading Necessary?

There are two major reasons for due diligence. The first is to make sure the property is what you thought it was. The second is to give you the chance to renegotiate if it’s not.

With due diligence, real estate is not only safer but also more profitable.

For larger deals, I like to list my assumptions up front. Examples of assumptions might be that approximately 90% of tenants are paying, the HVAC is in pretty good working order, the roof needs to be replaced, and so on.

By documenting this, if assumptions are proven inaccurate when performing due diligence, they can be referenced when asking for a price reduction.

But even without such a list, you can always ask for a price reduction or amend other terms if you find something amiss. Remember, everything is negotiable.

Aside from a price discount, problems discovered during due diligence might be resolved by asking for certain issues to be fixed, asking for financing, asking to extend the closing or inspection period, or some other way.

That being said, you shouldn’t plan on retrading from the get-go or retrade over something trivial. If you do, you’ll quickly get a reputation and sellers will be less likely to want to do business with you.

Final Decision and When to Walk Away

When all the hay is in the barn (as my old football coach would say), I like to play devil’s advocate. I do this right before the inspection period expires, and I only do it for larger acquisitions. But I’d recommend that newbies definitely consider it—even for a house!

The problem we’re often fighting is our own confirmation bias. The tendency is to want to be consistent or to simply be right. If you have thought the deal makes sense from the beginning, you may ignore contrary evidence to maintain your initial belief.

To fight this tendency, I make the best case I can to not go through with the deal. Remember, the person who usually wins a negotiation is the one who’s willing to walk away.

Always be willing to walk away, and never become emotionally attached to a property. At the end of the day, it’s just an investment. No one becomes emotionally attached to their GE stock. (I hope.)

And despite being under contract, until the ink is dry on the settlement statement and the deal is funded, you’re still in negotiations.

Summary of the Process

Some parts of real estate investing are a lot of fun. Some aren’t.

Due diligence requires time, effort, and attention to detail—but it’s absolutely worth it. Not only will it save you from costly mistakes, but it will also provide you with opportunities to get even better deals.

Furthermore, many new investors struggle with confidence and are scared to death going into their first deal. Knowing how to perform thorough due diligence can alleviate much of that fear.

Nothing is entirely certain in real estate investing (or life!), but due diligence can provide a much higher level of assurance.

Do you have anything to add about due diligence? Or would you like copies of any of the documents I’ve referenced?

I’d be happy to share! Comment below. 

About Author

Andrew Syrios

Andrew Syrios has been investing in real estate for over a decade and is a partner with Stewardship Investments, LLC along with his brother Phillip and father Bill. Stewardship Investments focuses on the BRRRR strategy—buying, rehabbing and renting out houses and apartments throughout the Kansas City area. Today, they have over 300 properties and just under 500 units. Stewardship Properties on the whole has just under 1,000 units in six states. Andrew received a Bachelor's degree in Business Administration from the University of Oregon with honors and his Masters in Entrepreneurial Real Estate from the University of Missouri in Kansas City. He has also obtained his CCIM designation (Certified Commercial Investment Member). Andrew has been a writer for BiggerPockets on real estate and business management since 2015. He has also contributed to Think Realty Magazine, REI Club, Elite Daily, Thought Catalog, The Data Driven Investor and Alley Watch.


  1. Julie Fullmer

    Thank you very much for the article! We are looking at our first investment property. It’s an ugly duckling but after using this information hope to figure out if it can be a swan. Wish I didn’t have to do this long distance though.
    Any forms I can use would be a great blessing.
    Thank you,

  2. Bill Syrios

    If you know about the personality test Kolbe (, you know the term Quick Start. Many RE investors and entrepreneurs, in general, score high on the Quick Start scale…including me. That makes us, as the name suggests, fast, by-the-gut decision-makers: “Yes, that seems to make sense. Let’s buy it!”

    Such inclinations can serve us well in investment decisions, until it doesn’t. Quick Starts–and you know who you are–especially need to slow down and take Andrew’s advice by applying careful, patient attention to his lists of due diligence items.

    One thing I would add that has helped me is to surround myself (in our team) with Fact Finder types (see Kolbe again). Fact Finders more naturally follow due diligence procedures in life which will normally come through in how they approach RE purchase decisions.

    In just one example, “a Fact Finder” saved me and partner a cool $100,000. We were in contract to purchase an apartment complex in Dallas for $950,000. We knew the property needed lots of work but felt like we were getting a solid price. What we didn’t take seriously, until our Fact Finder friend dug it up by her careful attention, was how inconsistent the rents were over the year before sale.

    As we dug more deeply we found out the seller was padding the occupancy through his property manager by dropping rental application criteria and inflating rents by giving concessions. Just a couple of days before closing the sale we confronted the property manager and the seller about what was going on. In the end the seller dropped his price from 950,000 to 850,000 and believe me, we needed those extra concession dollars as we subsequently tackled the rehab job that was still more expensive than we anticipated.

    For you Quick Starts out there…you can take a friend of mine’s approach: double what you think it will cost you for rehab and then add another 10% on top of that. Or, maybe better yet, heed Andrew’s (Fact Finder) advice and put in the time to do quality due diligence. It will help you avoid making bad and really bad decisions not to mention, sleep better at night!

    • Bill Syrios

      Correction. Our own “basic due diligence” saved us $55,000, from $1,000,000 to $950,000. Our friend (Amanda’s) “in depth due diligence” saved us another $120,000 on that deal! Getting a RE investment minded Fact Finder to help you or transforming yourself into such a Fact Finder for purposes of quality due diligence can make all the difference.

    • Miles Lacy

      Andrew, I cant express enough how much I appreciate your attention to detail, process flow, and completeness in this article. As a new investor in the KC area, this is a very refreshing view in what I perceive so far to be a world of Quick Starts (as your dad calls them). I prefer to be very analytical in every aspect of my investments but of course lack the experience and always feel like I’m missing something during D.D. and spend way too much time in the process.
      I was very excited to see your upcoming BRRRR workshop on March 16th, and plan to see you there!

  3. Ryan Dossey

    I LOVE that you get into confirmation bias. It’s hard for investors to admit that they’re wrong or that the deal no longer makes sense.

    Kind of reminds me of sales guys cashing the checks in their head before the deal closes.

  4. Kevin Kern

    Great article, something that every investor should read. Did a nice job of explaining everything in thorough detail.

    With there being so many different moving pieces in a real estate deal, it is very easy to feel intimidated (if new) or let something fall thru the cracks (experienced).

    Due diligence is key!

  5. Ben Leybovich

    Andrew, I am commenting more out of respect for your accomplishments, and respect for your desire to educate, both of which are second to none in my opinion. I’d like to add a few points, which I hope will help a few folkjs.

    1. is not particularly accurate. I tend to avoid platforms such as this in my rent-setting.

    2. In this way you and I are very different, but your CF pro-forma indicated $0 for payroll. I understand that you run your own PM, but in my world if the property doesn’t absorb management and payroll it is immediately out. At $1000 rents you’re generally taking 90+ units.

    3. Property taxes in your example of $19,000 is more than $1,000/door. This is extremely high burden inside of the OpEx, and tells me something about the general market that I don’t like. Rents of much in excess of $1000 are needed to begin to underwrite such a load. Same could be said about insurance in this case.

    4. I am not seeing the IRR calculation. I know this is a re-positioning project, but what does the exit look like? I mean, you will do the work, but eventually, be it in 5 years, 7, or 10 years, you’ll need to get out, and I want to know how much equity you are getting for the work you are doing. What does this look like…? To give you an example, the property we’ll close on in about 3 weeks looks like $13M all in and $19M-$20M out. This is a necessary component of the DD – underwriting the exit.

    Hoping this commentary helps someone a little bit.

    Thanks for a great article. It’s obvious you put a lot of thought into this piece!

    • Andrew Syrios

      I always appreciate some constructive criticism, especially from someone as successful as yourself Ben. A few notes on your points:

      1. I generally agree, I would only start there to get a vague idea before directly comping it.

      2. Most of what we buy are houses and small multi’s, so payroll is hard to allocate, so we charge an internal management fee. We are looking to get into multi’s and syndications more and I’ll be making sure to review your posts on those matters.

      3. This was a portfolio of houses (which I should have mentioned, even after editing twice I still miss stuff… the joys of writing amirite?). So the taxes are usually (in KC) about $1000/unit. But the rents are higher which compensates.

      4. I do run an IRR analysis on apartments and portfolios (although not on individual houses). I only link to my discussion in that piece, but would be interested to get your thoughts:

      Thanks again Ben!

  6. Luis Ortega

    Very good information and perfect timing.
    I’m a newbie and will be performing due diligence on a property very soon, I’m nervous about the whole process, I will definitely be using this article as a guide.
    Please share copies of forms/docs
    Thank you

  7. Devin Moeser


    Thank you very much for the article. I read it last week and came back to read a second time. I have been struggling to adopt some of the D.D. approaches that I have learned working for larger construction and development companies but sometimes they are overly burdensome for smaller operations.

    If the offer still stands I would be interested in the docs that you reference in the article. It sounds like they would be great assets.

    Thank you again for the article.

    • Andrew Syrios

      Hey Devin, thank you for the kind words. It’s definitely a lot to digest, but it’s worth spending some time with it. I sent you a colleagues request, please accept and I will send you the documents. (We have to be colleagues to share docs.)

  8. Jonathan Jaffe

    Dear Andrew,

    Very informative and the format is exactly what I think many people will find very useful, obviously given the comments already here. If I could also ask to be a colleague so that I can take you up on your offer to share those documents. I’m about to go under contract with my first, and your expert format will no doubt prove very useful. Thank you for your generous offer!

  9. Benjamin Hammond

    Thanks for the valuable info. I would also like a “colleague” sharing of the docs mentioned. I tend to look big picture and need tools that will help me also consider the critical seemingly small items.
    What suggestions do you have for due diligence on long distance properties? I’m new to investing but
    looking at a long distance market.
    Thanks in advance.

  10. Ilir Lako

    Great article Andrew. I also watched the video that you and Ryan Dossey did on the topic.
    I am new to the real estate world and I am trying to learn as much as possible in order to acquire a property for additional income.
    I would love to get a copy of the forms and templates you showed.

  11. Charles Salter Iii

    Andrew thanks a million for this post and the video you made back in december on this topic. I have a property under contract and estimating the rehab has been difficult without knowing exactly what to look for. The book by J. Scott on estimating rehab costs will be my next purchase.

    Can I get a copy of the forms you use in this article?

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