Analyzing an apartment deal is something that you have to do very carefully since there are many variables that can factor into it. There’s a lot of underwriting with the financials and there’s a lot of visual inspections that have to be done within the actual apartment units, the duplex or whatever you’re looking into buying. Continue on to see how you can perform due diligence.
Follow Structured Due Diligence
Firstly, in order to successfully purchase a property, you have to follow a structured due diligence process. This way you don’t lose hundreds of thousands of dollars reviewing deals that you have under contract. Additionally, I’ll share with you how I achieve the best price working with sellers of properties to ensure the investment works.
Exterior Due Diligence Components
Initially when purchasing a property, there are a lot of exterior components that you have to look at. You’ll have to check things such as:
- How was the building constructed?
- Is there a basement? What is the condition of the basement?
- Are there any stress cracks in the foundation that will have to be repaired?
- Is there any debris that needs to be removed before you take over the property?
- How do the common areas for residents look? Have they been maintained?
- What is the type of material and condition of the roofs, siding and windows?
- How do the mechanicals and hot water tanks look and how old are they?
- Has the landscaping been maintained?
- What do the apartments look like? Do they have good floor plans?
- Do you see anything that has been neglected?
As you can see, there are a lot of little things that need to be looked at. You want to make sure you don’t overlook anything. For example, what are the electrical panels? Are they federal specific or are they more of a cutler hammer? All in all you have to really dig in and look at the property.
Additional Exterior Components
Continuing on, there are other exterior factors to check as well. For example, you have to check out the roofing situation. Ask yourself: Do the shingles have any curling? Are there any issues with water leaks? Also check out the gutters, windows, doors, and more. There are so many pieces that have to be looked at when you’re first buying a property, you don’t want to miss anything.
Furthermore, tenants sometimes leave garbage or belongings that have to either be put back into storage rooms or removed out of the building before you take it over. If you don’t take care of the property upfront, it can be a headache the day you officially take ownership. Each property is unique and has different circumstances. Nevertheless, make sure to consider all of the items above and apply them to your property.
Financial Due Diligence
On top of all the visual inspections, you’ll also have to confirm that your financial due diligence checks out. This requires you to review the properties rent roll, T12 historical financials, list of capital improvements made to the property, and any other documentation you can get your hands on to perform your underwriting.
Find An Expert
Lastly, if you’re not experienced with all of these different components that you need to inspect, let me help you put all of the pieces together. Save yourself the time and expense of making mistakes. Learning how to underwrite deals from someone who is experienced will save you tens of thousands of dollars. I will guide you through the process of looking at the property and analyzing it correctly to make sure you’re paying the appropriate price for what you’re buying.
Overall, you have to know how to underwrite a deal, and make sure you pay the correct price so you achieve the appropriate return on your investment.
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