How do due diligence when buying an apartment

Investing in commercial real estate is a popular investment strategy, and diligence adequate due can mean the difference between a property that generates income or loss. This article will guide you through the steps leading investors in apartment complexes should take to protect against loss. Ultimately, the goal of diligence due is to create value.

How do due diligence when buying an apartment?

  1. Apply the income statement on an annual monthly, quarterly and the last five years. You must be able to discern trends in income and expenses.
  2. Graph the holiday gross, operating income and higher expenses in a spreadsheet. Here are the main drivers of net income and should be investigated carefully.
  3. Projected future income, time to fill vacancies and maintenance costs. You also need to know how many units are in the complex and the general state of these units.
  4. Create a sensitivity analysis on these variables to determine the effect of raising rents. Requests a report of vacancies and be sure to check all leases. You will have to know the average life of these agreements and expiration.
  5. Check all units to check conditions. This will provide a basis for negotiating the price. Notes of each unit needs repairs and estimates the associated costs.
  6. Divide the number of units for sale price. This will give an average cost per unit. Compare this to other resorts as well as rent per unit. You are looking for opportunities to create value.

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