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:

1st Year Cash-on-Cash Return
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

Title discrepancies (name mismatches, undisclosed liens)
Rent roll inconsistencies (stated vs actual income)
Deferred maintenance (roof, HVAC, plumbing)
Problem tenants (non-paying, frequent complaints)
Neighborhood decline (increasing vacancies, crime)

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