Due Diligence Tips For Large Multifamily Properties
Are you planning on investing in a large multifamily property that has up to 100 units or more?
If so, physical due diligence is a necessary part of the closing process, but the big question is how can you thoroughly evaluate every unit in that property so that you have a clear understanding of what condition the property is currently in, and what issues may need to be addressed?
In this article, I’ll answer this question by providing you with a clear framework that you can use for handling physical due diligence on a large multi-family investment property.
What Does The Multifamily Physical Due Diligence Process Include?
Investigate Each Unit – The first part of the physical due diligence process includes taking the time to inspect each unit in the multi-family property.
When it comes to a large multi-family property, you’re going to need a due-diligence team to assist you because working with a team makes the whole process a lot easier since one person cannot easily handle the process of inspecting each unit in the multifamily property themselves.
During the process of conducting unit walks, the goal of your team should be to take pictures of each unit in the multifamily property including countertops, flooring, fixtures, and the general condition of each unit.
When it comes to taking pictures of appliances in each unit, your team should also be focusing on also taking pictures of serial numbers and model information of each appliance. This information will be beneficial for the property management company that you ultimately hire to manage that investment property.
Review Major Systems – While investigating each unit individually, your team should also be inspecting major systems at the multi-family property including the condition of the foundation of the property, plumbing, electrical, and HVAC systems.
Inspect The Roofline – Obviously, as part of physical due diligence, you’re also going to want to inspect the roofline of the multifamily property that you plan on purchasing.
If the multifamily property has over 100 units, you’re not going to want to hire a contractor to take the time to inspect that roof themselves. To save time, and also to ensure the safety of the individual who is inspecting the roof, you should hire a photographer who specializes in aerial drone photography.
Look For Deferred Maintenance This can often be one of the most expensive aspects of purchasing a multi-family property because, sometimes deferred maintenance can be hiding in plain sight for everyone to see or, it can only be found after a complete and thorough investigation of the property.
When investigating a large multi-family property for deferred maintenance issues, your team should be thoroughly inspecting any part of the property that was made of wood. This includes reviewing balconies, staircases, fences, and railings.
Your goal should be to look for wood rot, and to test the structural Integrity of any wooden part of the multifamily property, because it’s not uncommon for wooden parts of some multifamily properties to lose their structural over a period of time.
After inspecting the wooden parts of the multifamily property, your team should also be thoroughly reviewing the concrete surrounding the property including the sidewalks.
This is important because you want to do specifically looking for cracks or damage to the concrete that needs to be repaired since cracks in the concrete can lead to trip and fall hazards and potential lawsuits down the road
The most important goal when investigating a multi-family property for deferred maintenance is to walk away from the deferred maintenance inspection with a clear understanding of what’s happening with the property. You should have a clear understanding of what’s in good condition, functional, and which parts of the property need to be repaired or replaced immediately.
Which Technology Should You Use During Your Due Diligence Inspection?
As I mentioned earlier in this article, during the process of conducting due diligence on a large multi-family property, you shouldn’t hesitate to utilize the most convenient forms of technology, including drones, to investigate the property.
Besides using drones, you should also utilize other forms of new technology including Matterport cameras to conduct virtual walkthroughs and take 3D floor plans of each unit in the property.
Matterport technology is time-saving because most multi-family properties don’t have 3D floor plans so these will be convenient to have down the road.
You should also consider having 3D models created of the exterior of the building as well because this will give you the ability to clear understanding of which capital improvements to the property need to be made, including choosing new paint colors, or roofing for the property as well.
What Safety Measures Should You Utilize During The Inspection?
If you’re reading this article when Covid-19 is still active in your city or state, you should require your team to mask up and wear disposable gloves when inspecting each unit in the multifamily property.
Taking the proper precautions to keep her team safe is important, especially when it comes to opening electrical panels, reviewing HVAC closets, or investigating parts of the property which may have not been opened up or inspected within the last several months or years.
As a general rule of safety when inspecting each unit in a multi-family property, your goal should also be to have your team members get in and get out of each unit of the property within 5 minutes or less because, sticking with this timeframe will keep them safe while ensuring the speed of the inspection.
Contact Rent Portland Homes – Professionals
At Rent Portland Homes – Professionals, we specialize in local property management. This means you can count on us to provide you with all of the property management services that you need to professionally manage your multifamily property. To learn more about the services that we can offer you, contact us today by calling (503) 447-7735 or click here connect with us online.