Checklist for a Buy and Hold Rental Property

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I'm interesting in purchasing a rental property, but I'm not close enough to view it quickly.  I have someone viewing it for me to by my eyes.  Does anyone have a good checklist that I can use when I have someone else viewing a property for me?  I'd like to give them a checklist, but I want to make sure I have a good one.  Any feedback is welcome!  Thanks!

@Samica Harris I work for a property management company in Indianapolis. I encourage my clients and prospective clients alike to build a team for this exact process. Mainly, a realtor (who gets paid when you close,) is going to see a project differently from a contractor (who gets paid by the amount of work he does,) and that will be entirely different from a property managers perspective (who gets paid by the amount of income it produces.) By looking through the eyes of a team who all have different opinions, you will get a better view than through just one source... especially if that source is a wholesaler of listing agent. 

Here's my recommendation.

If you are buying through the MLS, have your own realtor and have them go out, take photos/video of the property. Ensure that they get pictures of the roof, mechanicals, foundation, and plumbing/electrical systems. These will make a bigger impact on your investment as a new roof and furnace doesn't necessarily demand a higher rent rate but will help you lose tenants. These capital expenses don't usually have much impact on the rent rate so if they need done, you want to ensure that it's figured in the rehab budget.

Research the area. How is the crime? Is the school system a factor? What conveniences and amenities are nearby? Are there any industrial areas nearby (landfills, recycling facilities, waste water treatment facilities, train tracks, air ports, prisons reentry program, etc.?) Is it in a flood zone? Are there problematic homes in the immediate vicinity (boarded up homes, illegal dumping, abandoned cars, unkept yards, etc.?)

If the home is tenanted... get copies of the leases and rent rolls. What are the tenants paying? When does their lease end? Are they current? How much is being held in a security deposit? Is the security deposit going to be rendered to the buyer at closing? I usually recommend that you DO NOT pay a premium for a tenanted property as usually people are selling their problems. Odds are, the tenants are poor performers and the home is in distressed, but the seller will guard that information as it gives you more leverage in price negotiations.

Unless you are doing a full gut-rehab, I always recommend getting a home inspection and having a GC walk through the property as well. Your realtor should be able to coordinate these activities.

Ensure that you get market rent rates from both the realtor and property manager. Frequently, realtors are not as accurate with their rental information unless they work heavily in that space, where as property managers should always have the most current data.

You will also want to understand property taxes, HOA fees, and get an idea of insurance costs. Your realtor should be able to help with this as well and a good insurance company should be able to assist with the insurance costs.

After verifying against the location criteria, understanding the scope of any rehab and having a budget built, and getting a good understanding of the probable rent rate, you plug these new numbers in the original underwriting you did with assumptions and see if it fits the original plan. If it doesn't, negotiate the deal to better fit the criteria that you set up in advance.

Here's the checklist:

  • Get opinions on specific location. Crime? School? Flood zone? Specifics to that location?
  • Get market rates to determine ARV / FMV. In some markets you will want retail prices and as-is, distressed prices if investing in areas with lots of rehabs.
  • Understand the property taxes, HOA fees, property management fees, and insurance costs.
  • Get rent rates for the location, size, amenities, condition, time of year, etc.
  • Get a home inspection and have a GC build a rehab budget.
  • Verify tenant information (if tenanted.)

Plug all of that data into your calculations and see if it performs. Do Not fudge the numbers to make it work. The only thing worse than no deal... is a bad deal. Don't take a bad deal because you are eager... ensure that it's a deal and get a third party to help you put an eye on it.

Hope that points you in the right direction!