Due Deligence Part 2
As Cindy suggested, we actually went to Memphis TN to see the actual properties in this beginning of Feb. We went for two main reasons: Inspection of the target property and neighborhood and talking (interviewing) the property manager.
1. Inspection of the target property
We realized that this process is one of the most crucial steps in the real estate process. We plan to purchase two properties. From the number (based on the calculation) stand point, one of two properties we chose was totally made sense. Cashflow from that property looked great. However, we changed our mind after seeing the actual property and its neighborhood because the location was not really the place what we were imaging. There were not so many houses around that area. Also, house was surrounded by many trees that possibly caused damage to the property. We would never realize this without visiting actual place.
2. Interview with property manager
During the property due deligence with property manager, we asked the followings:
1) What service they do and cover
2) How many properties they currently manage
3) What kind of authrities property manager possess
4) How do they deal with their tenants, how they qualify
5) Current memphis rental market
More importantly, we wanted to know what kind of personality and motivation that property manager has. We have heard that it is depending on property manager who either makes or breaks the real estate investment. So, we tried to understand his peronality and motivation while we are talking to him and asking the questions. As far as we felt, he is very enthuristic and seems to be the guy who actually put his effort into what he is doing.
Based on due deligence (both cash flow calculation and physical visit of the property and neighboorhood), we decided to go for 2 SFR properties in Memphis area. Next step is the lending process. But, I didn't imagine that this lending process would take such a long time.
1. Inspection of the target property
We realized that this process is one of the most crucial steps in the real estate process. We plan to purchase two properties. From the number (based on the calculation) stand point, one of two properties we chose was totally made sense. Cashflow from that property looked great. However, we changed our mind after seeing the actual property and its neighborhood because the location was not really the place what we were imaging. There were not so many houses around that area. Also, house was surrounded by many trees that possibly caused damage to the property. We would never realize this without visiting actual place.
2. Interview with property manager
During the property due deligence with property manager, we asked the followings:
1) What service they do and cover
2) How many properties they currently manage
3) What kind of authrities property manager possess
4) How do they deal with their tenants, how they qualify
5) Current memphis rental market
More importantly, we wanted to know what kind of personality and motivation that property manager has. We have heard that it is depending on property manager who either makes or breaks the real estate investment. So, we tried to understand his peronality and motivation while we are talking to him and asking the questions. As far as we felt, he is very enthuristic and seems to be the guy who actually put his effort into what he is doing.
Based on due deligence (both cash flow calculation and physical visit of the property and neighboorhood), we decided to go for 2 SFR properties in Memphis area. Next step is the lending process. But, I didn't imagine that this lending process would take such a long time.
Comments (3)
Environmental compliance can be a big issue. I'm also finding that it is important to carefully review any easements or encroachments that might exist.
Account Closed, almost 16 years ago
For multifamily due diligence, include ADA, Fair Housing and enviromental compliance. Ask in writing if there are any pending legal actions for the property.
Lisa Lunger, about 16 years ago
I have also struck up conversation with neighbors when visiting a property that is vacant. It can be surprising what the neighbor knows and is welling to share.
Account Closed, about 16 years ago