DUE DILIGENCE MULTIFAMILY

[Bernard Obrien]

G'day everyone, My name is Bernie from Minneapolis MN.  

Would anyone share with me checklist &/or processes to follow and check off in a due diligence process on a medium multifamily deal.

My objective is to purchase a  50-100 unit class C property in the  S.E. USA 1975 or later construction with a value add or stand alone self sustaining financial model.  Demographics are at least 50K town population; less than 17% poverty; median family household income 35K+; Geographic region: TEXAS, OKLAHOMA, KANSAS, MISSOURI, TENNESSEE, ALABAMA, GEORGIA, NORTH CAROLINA, SOUTH CAROLINA, FLORIDA.

[Amber Gonion]

Due diligence is such an important part of the purchase.  It is important that  you have an agent that will assist you in the process.  A general checklist will get you most things you will need, but every property is different and may require different things.  We manage or set up our clients for self-managing so we are very vigilant in obtaining every possible document.  We write them all into the purchase agreement.  Here are some things to include.

Copies of leases and applications

Access to Yardi, Onesite, or other PM software

Documentation of debts, past due etc.

Rental licenses

3 years taxes

Rent roll with lease start, end, amount, and deposit. be sure PA prorates rents and transfers deposits with interest)

Service agreements lawn, snow, cleaning, laundry etc.

Copies of tenant notices  given within 90 days

Operating statements 3 years

Disclosures, LBP, etc

Contracts for improvements in last 3 years

Employment contracts/ payroll 

Insurance policies and claims history 5 years

inventory of property on site (office furniture, common area items, etc)

Repair records for the building 2 years

Copies of bills such as heat, electric, water, etc to verify (also helps with transfer)

Copies of current inspections.

Boiler logs 

Past litigation

Certificate of occupancy 

Tax records (we will pull)

warranties sill in effect

floor plans

estoppel agreement

Zoning 

Historic designation

Prepare lease assignments

Prepare prorated rent and deposit agreement for closing

There are often many more property specific items.  The bigger the property the more items in general.  One thing to remember is once the property closes you should already have everything you need to begin operating.