Multifamily Due Diligence

[Aaron Mazzrillo]

What do you look for when buying a 5+ unit apartment bldg? What is on your due diligence checklist?

[George Paiva]

Great Responses so far. Here is a checklist:

• Document to Obtain (Type, Name, etc.):

NOTE: Important to keep the date of when these items were received

FINANCIALS (get from Property Management Company or the Seller):

Annual Operating Statements (for past 2 years)

Monthly Operating Statements

Year to Date Operating Statement

Rent Roll for the last 2 years

Last 3 month's Bank Deposits by the seller

Budget Forecast

Existing Loan Documents ** ask if will take Assumption

Security Deposit Account Statement

Utility Deposits

Request Schedule E if questionable financials, certified by accountant.

OPERATING INFORMATION **** Must sort by importance:

Management Contract

Copy of all Lease Types (all leases delivered at closing)

Concessionary Rents

Lease Expiration Report

Utility Bills (for Water, Sewer, Gas, Electric, CATV, Ethernet, Phone) - for past 2 years

Property Tax Bills - for past 2 years

Service Contracts (all currently under contract: trash, exterminating pests, maintenance, laundry, pool, elevator)

Advertising Contracts

Payroll Register (employment contracts)

Operating Manuals (phone, computer, fire system, etc.)

Insurance: Policy (premium disclosure)

Insurance: Claim History (for past 3 years)

Insurance: Carrier Risk Assessment

Miscellaneous Agreement (Vending, Pay Phone, etc)

Capital Improvements and Maintenance History (for past 3 years)

Incomplete Maintenance Requests (for last 3 month's maintenance requests)

Yellow Pages Listing Contract

Credit Bureau Contract

Pet Policy

Commission Agreements

Rent.com review

LEGAL AND PHYSICAL INFORMATION:

THIRD PARTY INFORMATION

Appraisal

Deed

Title Policy

Last Sale Price/Date

Tax Assessment: Land/Building

Survey (Get the original)

Architectural Plan

Site Plan

Inventory of Personal Property

Tools/Supplies Inventory

Business License

Zoning Certification

Building Code Compliance Letter ** Tell bad news fast to your investors; don't hold off on this

Certificate of Occupancy ** Tell bad news fast to your investors; don't hold off on this

Rental Ordinances ** Tell bad news fast to your investors; don't hold off on this

Litigation History ** Tell bad news fast to your investors; don't hold off on this

Tenant Estoppels (Optional at Closing) ** Tell bad news fast to your investors; don't hold off on this

Building Permits

MARKET INFORMATION

Market Survey (3 - 5 nearest competitors)

Existing Competitive Supply Surveys

Environment Surveys - Phase I/Phase II, if necessary

Engineering Report

Fire System Inspection Reports

Elevator Maintenance Report (if applicable)

Boiler Inspection Report

HVAC Inspection Report

Lead Paint - Inspection reports / tenant waivers / history

Mold - Inspection reports / tenant waivers / history

Future Competitive Supply Forecast

Pictures - Aerial / Ground

Area Map

Apartment Association

Apartment Guide Listing

Copies fo All ADvertising, Brochures, Floor Plans

Demographic Reports: Housing, Income, Employment (3 radii - 1 mile, 3 miles, 5 miles distance)

Traffic Study and/or Road Improvement Plans

Neighborhood Survey: Shopping, Schools, Employers

Crime Report