Real estate investors need to move quickly in today’s competitive real estate market. But, most of the times, these real estate investors skimp on due diligence to seal the deal. According to experienced real estate professionals, skimping on due diligence is a huge mistake. Failure to perform thorough due diligence will ultimately put your entire real estate portfolio at risk. Hiring property management services helps you to do your due diligence on multifamily properties before closing any deals.
Conducting a financial audit helps you to fact-check the assumptions you have about your property. A comprehensive financial audit requires,
- 3 years of trailing financials
- 1 year of monthly profit and loss statements
- A copy of the current rent roll
- 2 years of tax returns
- Utility bills for the past 12 months
A financial audit provides a detailed overview of operating income and expenses. It also allows you to make tweaks to your pro forma and evaluate the income-generating potential of the asset.
Property Condition Assessment
Before closing on a property, most homebuyers will get a home assessment that determines the present physical condition of the property. This assessment provides a professional opinion on any improvements needed in the future and ensures that the property is in compliance with the local codes.
As a property owner, you may have some basic assumptions about the property’s rent potential depending on the familiarity of the area. But, how can you figure out your target demographic and know the market as a whole?
Performing a market survey helps you to verify your assumptions of the local market by taking several criteria into consideration. This includes,
- Unit type
- Unit size and
- Other amenities
Conducting a market survey becomes relatively easier if you are working with an expert in property management in Kansas City.
Scheduling for an environmental inspection enables you to identify serious environmental issues such as asbestos, lead paint, underground oil tanks, and wetlands that need immediate attention. This study will be very useful if your property is located in dense, urban neighborhoods, or in areas with an industrial legacy.
Before submitting an offer or closing, tour a handful of units in the multifamily property. Ask tenants whether they had any problems with the unit in the past and this information can be incredibly insightful.
Are you all set to rent or purchase a multi-family property? Take all the above mentioned due diligence actions to avoid putting your real estate portfolio at risk. Contact your property management service in Kansas City to learn more.