Rushing into sealing a deal as a real estate professional can make you run at loss and put your entire real estate portfolio at risk. Despite how competitive and quick the real estate market is, there is great need to do thorough due diligence like the Ortam Group building inspection, especially as a multifamily investor. This is the only guaranteed path to a successful investment if you want to avoid becoming a loss-leader. We recommend the following four steps for your due diligence action as an investor on multifamily properties. Ensure you consider these steps before sealing up any deal.
#1:Trace the financial history
To be on a safe side as a multifamily investor, check for financial audit reports containing bank statements for at least 3 years; rent toll including payment history and any form of subsidies accepted; monthly profit and loss statement for at least one year; utility bills for the last 12 months as well as tax returns for at least 2 years.These details will boost your confidence and give you clarity about the income generating potential of the asset you intend to purchase. Do not rely on the numbers provided by the listing agent; get financial service consultants to do a proper analysis of the property with a detailed overview necessary to guide your decision-making process.
#2:Conduct a Property Condition Assessment
Real estate properties require careful assessment before investing in them. Many commercial building owners invest little to no amount of the generated revenue on maintenance of the property; they rather direct their incomes to other needs. This is the main reason why you need to conduct a proper inspection and assessment of the physical condition of any property before investing in them. A good PCA will contain a detailed cost estimate for repairs of damaged or worn out structural parts and materials. This is a good tool for negotiation as most buyers use the Property Condition Report to secure a lower purchase price.
#3:Understand the market
The economic stability, demographic target and competitiveness of a property in the market will go a long way to tell you how profitable your investment will turn out to be. Conduct a market survey considering the rents, unit type, unit size, amenities, occupancy etc. This helps you to verify your assumptions about the property’s rent potential and the local market.
#4:Assess the Environment
Ensure you conduct a thorough environmental inspection especially when the properties you are interested in are situated in dense, urban neighbourhoods or areas under strict regulation policies. Lead paints, asbestos, underground oil tanks and wetlands are examples of environmental factors that could pose serious problems if hurriedly ignored.