Due Diligence Checklist for Multifamily Acquisition

If you’re looking to invest in a multifamily property in this market, it’s just a fact: Expect to analyze and make offers on multiple properties to find the right fit.

So, having a system in place to do the necessary due diligence will help you not only move faster but also make fewer mistakes. Our multifamily due diligence checklist is your starting point; click below to download now. This is the curated list our commercial team leans on as we help buyers analyze potential multifamily acquisitions, but can serve both buyers and sellers.

We’ve broken the checklist down into six sections: Financial Audit, Rent Roll Audit, Building Inspection, Market Analysis, Legal Audit, and Marketing Audit.

In practice, this checklist would typically be used by a buyer who just put a property under contract. So, using information provided by a seller on an offering memorandum or marketing package, a buyer has run those details through their underwriting model, determined that this deal makes sense, submitted a letter of intent or purchase and sale agreement, and now has the property under contract. At that point, our commercial team uses this checklist to make sure we haven’t forgotten any important items as we move toward closing.

Financial Audit

We review two years of income statements, vendor contracts, and various invoices to confirm the numbers we put together before submitting our offer. Quite often, the seller’s financials are inflated or incorrect, and we are looking not only for items that are wrong but line items that have been left off. For example, often the seller performs maintenance or landscaping, or manages the property, and these expenses need to be accounted for.

Rent Roll Audit

Putting a solid rent roll together means reviewing all leases, understanding what delinquencies look like, and making sure we know what prepaid rents and concessions will survive closing. Some lenders require estoppels—and it is not a bad idea to add this to your workflow. Many sellers won’t be familiar with estoppels, and if you plan on using them, you should add them to the purchase and sale agreement as a special stipulation, since they are quite disruptive to tenants and most sellers will not allow you to go door to door to talk to each tenant. See this article on estoppels for a template and background on how to use them.

We will also perform a rent study to understand what competing comparable properties are renting for, which will help you project where your rents should be. Click here for an article on rent studies and how to perform them.

The final step is to interview potential property management companies and select one that can help advise you on rent rates and the local market.

Building Inspection

It’s important to thoroughly understand the condition of the property and future maintenance expenses. Roofs, electrical systems, plumbing systems and HVAC systems should all be included. A thorough review of the plat and deed should be performed to understand any easements across the property, the locations of water and sewer lines, and any potential boundary issues. Your lender may require you to have a Phase I environmental report and an appraisal—these items can be time intensive, so make sure they are ordered early in the process. Some municipalities are very strict when it comes to certificates of occupancy, permits and inspections, so ask for copies of past inspections, along with permits for prior work performed.

Market Analysis

We could write a book on market analysis, but at a high-level, you just want to make sure you understand the neighborhood and general trends in the market. Are things getting better or worse in this area? Have there been new job announcements in the area?

Legal Audit

We review insurance policies and exceptions, as well as five years’ worth of loss runs. It’s a good idea to ask if there are any unrecorded agreements affecting the property, such as neighbors driving across the property or using the dumpster, for example. The seller should disclose any potential lawsuits facing the property at this point. Also, we review the community rules, the lease form itself and the current application form. There may be fair housing issues or blatant errors in the forms, and these should be considered and corrected immediately.

Marketing Audit

We collect as much information as we can from the seller regarding their current marketing package. This includes floorplans, brochures, logos, and a review of their website and current management system. Often, we find a wide gap between the current rents and what the rent study suggests the market rents should be, and this could be attributed to lack of marketing. You will also want to review the property’s website and confirm that the domain and branding are a part of the sale and included in the contract.

Download Due Diligence Checklist HERE

We encourage you to use the checklist on potential deals you’re working on, but if you would like an advisor to help you in the acquisition process from start to finish, email us to schedule a time to discuss a buyer representation assignment with one of our brokers.

That’s it! Please also let us know how we can improve our process in the comments below. Are there any items we’ve left off the checklist? What are the biggest mistakes you’ve made in the past that could have been solved with one of these bullet points?


Copyright (c)2021 | This post originally appeared in Jonathan Aceves’s blog and is republished with permission.

Estoppels: Why Investors Should Use Them


Last year, my partners and I closed on a portfolio of rental properties. The owner assured us that there were no leases or security deposits. After we closed, we discovered that there were in fact leases and deposits, and he refused to refund them.

We decided it would be cheaper to eat the difference than to pursue him in court, but the entire affair could have been avoided by using an estoppel.

What are estoppels?

Estoppels are usually short documents used to confirm lease details. They are a “signed statement by a party certifying for another’s benefit that certain facts are correct, as that a lease exists, that there are no defaults, and that rent is paid to a certain date. A party’s delivery of this statement estops that party from later claiming a different state of facts.” (Black’s Law Dictionary, 572, 7th Ed., 1999)

Estoppels usually confirm basic lease details such as:

  • The rental rate
  • Commencement and expiration date of the lease
  • That the rent hasn’t been prepaid
  • That the lease hasn’t been modified
  • That there are no defaults on either side

Why would I want to use an estoppel?

Often estoppels are required by a lender, but as an individual investor, you may want to include them in situations where the leases are unclear or if you’re unsure of the validity of the financial statements. Estoppels also ensure that the owner hasn’t collected prepaid rent or pocketed the tenant’s security deposits.

How do I use an estoppel?

You will likely want to add a clause to your contract requiring the seller to collect estoppels prior to close or allowing you to collect them from tenants prior to close.

This can be quite problematic on a larger property, as many tenants may pay electronically and not even interact with the owner or property manager on a regular basis. A simple way to execute estoppels may be for the owner to fill out the pertinent details and have them docusigned by the tenants or completed by as many tenants as possible during a property inspection.

Download Free Estoppel Agreement

Here is a simple, one-page generic version you can use. Feel free to make changes to it as needed. We hope it saves you time and money on an upcoming deal!


Copyright (c)2021 | This post originally appeared in Jonathan Aceves’s blog and is republished with permission.

Using Rent Curves to Study Multifamily Rental Rates

This is Jonathan Aceves with Meybohm Commercial Real Estate, advising business leaders and helping them make wise real estate decisions.  Today we’re going to be discussing Multifamily Rent Curves.  


How does one set out to study multifamily rental rates?  We do this by building a rent curve.  Let’s say you want to study the rental rates for housing in Martinez, GA.  We would do a survey of rental rates at apartment complexes in the area, and plot them on a graph.  The graph would start out looking like this:

Then we would separate them by class.  Class is a ranking system given to multifamily properties by investors, generally A, B, C, and D.  A properties are generally newer, amenitized, and really nice.  B properties are usually good, but maybe a little older, maybe not the same level of amenities.  C properties are in not-so-great areas, in fair condition, usually schools aren’t so good.  D properties are in bad condition and really rough areas, these are the kind that you wouldn’t go to at night.  Once you’ve broken them apart by class, you draw a curve over them.  You would end up with something like this:


It is interesting to note the steepness of the curve, and the distance between the different curves.  Another thing to note is that market changes shift the curves.  This is what we see in rapidly gentrifying areas—the entire curve moves out.


So how do you use the rent curve?  Well this helps investors identify opportunities for repositioning.  It also helps you identify management problems.  If I see a complex with below-market rents, I try to figure out why.  Is it a problem that an investor can fix?  


Thanks for reading!  Please like and share with those you think might benefit from this.  We’d love to hear from you! What are your thoughts about rental rates? 



Martinez Multifamily Market Report

This is Jonathan Aceves with a 2019 C-Class Multifamily Market Report  and a Martinez Multifamily Rent Study.  Click here to Download our Asking Rent Analysis. We studied 30907 multifamily, particularly around the Steven’s Creek Corridor.   What we found overall is that Class A Space commands about a 50% premium over class B space. 


The primary Class A Complex in our study was Nine Two Six West, at 926 Stevens Creek Road.  Nine Two Six averaged $1.26/foot/month asking rent.  Rocky Creek and Iron Horse we considered Class B, which averaged at .84 cents.  Fountainhead we considered Class C, and averaged $.69. 


 Takeaways: It does make a difference who the management company  is, where it is advertised, and having good photos and floor plans.  


If you are a multifamily investor with north of 20 units, you should sit down with the guys at Doorpost Management.  They can give you the same economy of scale as the as the 200+ unit complexes with their integrated maintenance.  Also the quality of their financial reporting is critical for owners that may be considering sales in the next few years. It’s hard to get a professional investor to take a serious look at your property when your manager can’t provide clean financials and rent rolls.  


Overall Multifamily Market Notable Recent Sales:

Crossroads Apartments (B Class-74 Units, sold at 6.91 Cap/$64K per door) 

Baywood Townhomes (C Class-14 Units, Sold at 9.3 Cap/$43K per Door)

2000-2006 Central Avenue (C Class-16 Units, sold at 6.3 CAP/49K per door)

Central Residents Corner (D Class-28 Units–Not yet recorded, sold at 30K per door)


We would love to hear your feedback!  What is your opinion of the multifamily market?  As always thanks for watching!  Please Like and share with a friend!





Columbia County Apartment Development Rezoning Moves Forward


Columbia County Apartments
Blackstone Camp Apartments Elevation
Blackstone Camp Site
Aerial View of Apartment Site


Southeastern Development received a recommendation for approval on zoning revision to modify the shape of the site on Blackstone Camp Road.  The property is near the upscale River Island Subdivision in Columbia County.  The project would be limited to 274 units, and would follow the River Island PUD narrative design standards.  Southeastern Development has already started the site work.  The project was technically approved in 2002. It recently has received a lot of criticism from neighbors, including a petition for the Columbia County Commission to reconsider.  


I think this is a good project and will ultimately be good for this community.  I think it’s important to have a healthy mix of housing, and new Class-A apartments force older complexes to lower their prices, and create a cycle which helps create a diverse offering of housing products.  Also, A-Class housing becomes B-Class housing, B-Class housing becomes C-Class, and so forth.   


It seems that lower-income neighborhoods that don’t want to see change and diversification fight against gentrification, while higher-income neighborhoods that don’t want to see change fight against “higher crime rates” and “overcrowding of schools”.  


Hare are a few additional resources, the Augusta Chronicle Article, the recent rezoning application on this project, and a 2010 Study by Columbia County on Multifamily development.  


This looks like a great project that should be great for Columbia County.  Augusta is continuing to grow!  What are your thoughts?