First property visit. What to look for?

Question

BP

I will be visiting a fully rented 11-unit property this week with the intention of buying and holding.

Does anyone have a "checklist" of things you like to see and/or document while visiting a property?  Are any of the items on the "checklist" things I need to ask the broker to arrange in advance?

Making sure I have all my bases covered. Thanks in advance for your feedback!

Jon Klaus · Answer

There is so much, but here are my thoughts off the top.  First, don't feel any pressure to notice everything, because you will do a lot of due diligence assuming you move forward on this.

Exterior condition:
Straight roof lines?
Condition of shingles
Foundation straight, not cracks?
Obvious deferred maintenance?
Landscaping maintained?

Inside units:
Carpets, vinyl, tile good?
Appliances?
Kitchen counters, tiles, etc.
Bathroom, shower/tub, fixtures
Windows
Need paint?
General repairs?
Look at HVAC--old, dirty?

How many occupied?
Why are the vacant ones vacant?  Ask, but figure out your own answer, too
Judge tenants as you would any of your own units you would rent.

Utilities:
Sub metered?
Master metered?
Central boiler or other systems?

Judge complex A-D
Judge area A-D

An of course prospectus/financials are a whole other category.  You can post financials here, hiding the address.

I'd expect to visit an 11 unit at least 4 times before making an offer and at least 4 more in the contract/option period.  With inspectors and trade pros on some of the visits.  On a future visit take a lot of pictures and/or video.  You can easily show questionable issues to others that way.  Also, it means you don't have to remember everything.

Jeffrey K. · Answer

I look at a lot of buildings and you should expect to see a unit of each floor plan or size.

It is really just to see that the unit doesnt need a ton of work and the rents that they are claming are in line with what you would expect from your knowledge of the area.

The most important on a big building is the mechanicals.  What are the pipes made of?  What type of roof does it have and can you walk on it?  What kind of wires does it have and is it breakers?  How is water managed on the property?  How are the common areas set up and do they look like?  How does the boiler look?  Is the water heater power vented?  Is the boiler, water heater, or laundry leased?  How are the windows and what are they made of?  How is the parking and what type is it?  How is the water pressure?  When was the elevator last inspected?

People will think you are JV if you start looking minor cosmetics like that on the first walk through or start testing outlets.  When you walk into a big building it is about the numbers.  Get it under contract and then figure out your cosmetics after your capital repairs.

Jon Holdman · Answer

Its my understand that on an apartment building you are only going to be able to do limited due diligence before making an offer.  Unlike an SFR, where you can probably have a very detailed look all over the place, you'll have to make a pretty cursory look at first and then make an offer if you're really interested.  Once you have an accepted contract (PSA), then you would be allowed to really dig into the property in detail.  There will be an inspection time limit that lets you bail out if you find a problem.

Nevertheless, Jon's list looks pretty good for a first look.  Just don't expect to see inside of every unit and look under every sink before you make an offer.

Jeffrey K. · Answer

I dont make 4 trips to a property before making an offer.  If it is a good deal someone else is going to buy it while you are making your visits.  Make 4 visits before you close.  If it is a good deal put it under contract sub2 inspection and doc review.

Account Closed · Answer

It's unclear to me at what stage of the process you are actually at.  Is this visit for the purpose of determining if you should spend more time on the property or have you got an accepted PSA and beginning your due diligence.

The amount of time and what I might look at are going to be different in each of these scenarios.  I always like to take a camera so that I can better assess what I saw when I was there.

Rob Gillespie · Answer

Tax returns!!!! Never take someones word for how the building performs.

Steve Babiak · Answer

PSA = Purchase and Sale Agreement

Ken Yearwood · Answer

:lol:  Didn't mean to sound harsh, sorry about that...

George P. · Answer

Ouch

Ken Yearwood · Answer

Charles, I'm not sure what PSA means, but yes this visit is to see if I should spend more time on the property.

However, I'd rather not have answers to the question be limited to the things I should be taking note of at any one stage in the due diligence process.  Instead, the questions was meant to ask "over time (regardless of how many times I visit the property or what stage I am at) what are things I should be taking note of?"

Is this more clear? Jon, Will and George's posts are examples of the types of feedback I am looking for.

Thanks

First property visit. What to look for?

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