Multi-Unit Property Due Diligence Checklist

By Brian Gibbons | REISkills.com

🔍 Phase 1: Pre-Purchase Financial Assessment

✅ Rent Roll Analysis

• Review current and complete rent roll

• Verify lease terms (start/end dates, security deposits)

• Identify month-to-month vs. long-term leases

✅ Income Verification

• Document all income sources:

  • Base rents

  • Laundry facilities

  • Vending machines

  • Parking fees

  • Storage rentals

• Obtain seller’s Schedule E and income/expense statements

✅ Quick Value Metrics

• Calculate:

  • Cap Rate (NOI ÷ Purchase Price)

  • Cost per Unit (Price ÷ Unit Count)

  • Cost per Sq.Ft. (Price ÷ Total Sq.Ft.)

  • Gross Rent Multiplier (Price ÷ Annual Gross Rent)

  • Replacement Cost (Current construction cost)

✅ Initial Offer Scenarios
Create 3 offer models calculating:

1. 1st Year Cash-on-Cash Return

2. 1st Year Total ROI

---

📊 Phase 2: Week 1 – Deep Financial & Market Dive

✅ Neighborhood Evaluation

• Drive the area at different times (weekday/weekend, day/night)

• Note:

  • Nearby amenities

  • Crime rates

  • School districts

  • Future development plans

✅ Expense Verification

• Audit:

  • Utilities (water, gas, electric)

  • Trash removal

  • Cable/internet

  • Insurance (verify potential rate increases)

  • Property taxes (check for reassessment risk)

✅ Rent Survey (Critical!)

• Get 5+ comparable rentals

• Sources:

  • Local classifieds

  • Rental agencies

  • Property managers

  • Tenant interviews

• Avoid:

  • Relying on seller estimates

  • Using fewer than 5 comps

  • Not verifying with actual tenants

✅ Recalculate Financials

• Update all metrics with verified data

• Prepare to renegotiate or walk away

---

⚖️ Phase 3: Week 2 – Legal & Physical Prep

✅ Title & Lien Search

• Obtain preliminary title report

• Verify:

  • Exact seller name matches deed

  • Existing liens (tax, HOA, mechanic’s)

  • Loan balances (get lender authorizations)

  • Property tax payment status

  • HOA fees/status

✅ Financing Exploration

• Interview multiple lenders

• Compare:

  • Conventional loans

  • Portfolio loans

  • Hard money options

✅ Preliminary Inspection

• Hire contractor for unofficial walkthrough

• Identify major repair needs

• Get 2+ bids for significant work

---

🏢 Phase 4: Week 3 – Intensive Review

✅ Document Collection

• All leases/rental agreements

• Bank deposit statements

• Maintenance records

• Utility bills (12-month history)

✅ Tenant Interviews
Sample questions:

• How responsive is management?

• Any recurring maintenance issues?

• Would you renew your lease?

✅ Official Property Inspection
Must-Check Items:

• Sewer line (scope if needed)

• Water pressure (test all units simultaneously)

• Electrical systems (panel capacity, wiring)

• Roof/attic (nesting materials, leaks)

• Foundation (cracks, water intrusion)

• HVAC systems (age, maintenance)

• Mold/moisture issues

• Plumbing (pipe materials, leaks)

• Fire safety systems

✅ Appraisal Review

• Obtain Letter of Opinion from appraiser

• Compare to your comps analysis

---

👥 Operational Due Diligence

✅ Management Evaluation

• Review:

  • Maintenance procedures

  • Tenant screening process

  • Emergency protocols

• Interview current staff

✅ Systems Check

• Assess:

  • Accounting software

  • Maintenance tracking

  • Rent collection systems

---

📈 Market Analysis

✅ Comparable Sales (4-6 minimum)
Match on:

• Unit count

• Sq. footage

• Bed/bath ratio

• Amenities

• Location (same neighborhood)

✅ Economic Indicators

• Local employment trends

• Population growth

• Infrastructure projects

• Rental vacancy rates

---

📝 Post-Diligence Actions

✅ Final Financial Review

• Recalculate all metrics with verified data

• Have CPA review numbers

✅ Decision Point

• Proceed with purchase

• Renegotiate terms

• Walk away if numbers don’t work

✅ Purchase Agreement Provisions
Ensure includes:

• Due diligence timeframe

• Inspection contingencies

• Remedies for undisclosed issues

---

🚨 Critical Warning Signs

1. Title discrepancies (name mismatches, undisclosed liens)

2. Rent roll inconsistencies (stated vs actual income)

3. Deferred maintenance (roof, HVAC, plumbing)

4. Problem tenants (non-paying, frequent complaints)

5. Neighborhood decline (increasing vacancies, crime)

📥 Download Full Checklist: REISkills.com/multi-unit-checklist

© Brian Gibbons | REISkills.com
Always consult legal/financial professionals before investing.