A proper vetting is crucial to getting the real estate returns you deserve.
Ready to dip your investor hands into an apartment building? Good for you. But wait! Before signing on the dotted line, make sure to do your homework. Surprises are great for birthdays, but terrible for real estate investments. Here’s a few tips.
Get a laywer. He or she will, among other tasks, handle what is known as due diligence. This process will alert you to any existing problems with the property. They should meet with the management team and get the minutes from board member meetings. Any reported problems from tenets should be apparent. Get your lawyer to also have the seller sign a rider disclosing any problems in the past two years and check city records for violations against the apartment. Too many red flags and you need to walk away – no matter how “exciting” the prospect might have seemed. No one needs more headaches.
While the laywer is doing his job, your money lender shouold be hard at work looking into the building’s finances. Does the building have pending lawsuits? Does it have sufficient funds in its reserves? Problems in these areas could cause the banks not to lend. No money, more problems.
Finally, the most obvious, look around you. How is business in the neighborhood? Are there a lot of vacant buildings? How are the neighbors, do you want to deal with them every day? Chances are you’ll be spending a fair amount of time at your new investment, especially at first. If you don’t love the area neither will good tenants.
Best of luck in your new venture! Comment below with any questions or additional vetting tips.
Disclosure: Some information for this blog was copies from Vetting an Apartment Before You Buy.