Don’t let anyone tell you that investing doesn’t require some hard work on your part! Carrying out a detailed due diligence report will take time, but when you’re finished you will be in the position to make an informed decision about potential properties. We have broken our due diligence checklists out into two categories—buying residential properties and buying commercial properties. We’ve also added a third checklist, which deals specifically with environmental issues. As you gather the information, check it off your list.
Long-term hold? Rehabilitation project? Quick flip? Personal residence? Development? Other?
Answers and Notes Questions to Ask and Information to Get
The name, address, phone number, and business number of the seller.
How long has the property been on the market? If the property was previously listed, for how long was it on the market before? Why is the owner selling the property?
Answers and Notes Questions to Ask and Information to Get
Property purchase price. Street address of the property. Square footage of the lot. Size of yard(s).
Legal description of the property.
Property Exterior and Lot Condition
Extent and condition of landscaping. Is there an in-ground sprinkler system, and
what condition is it in?
Does the property have an in-ground or above- ground swimming pool, and if so, what condition is it in?
Does property have fencing, and what condition is the fencing in? Schools, and school proximity . Shopping opportunities and access. Zoning of property.
Value of comparable properties in the neighborhood?
Estimated income/size of area families. Estimated area population growth.
Property Structure(s) and Interior
Builder (check credentials with the local contractors association and the Better Business Bureau).
Age of structure.
Condition and type of construction inside and outside.
Insulation up to code/storm windows, doors. What, if any, repairs are needed?
Have any additions been made, and are all additions properly permitted?
Square footage of structure.
Number of floors and square footage per floor. How many bedrooms and how many
bathrooms does the building have? What other rooms does the building have? List
rooms and describe condition of each.
Answers and Notes Answers and Notes Questions to Ask and Information to Get
Questions to Ask and Information to Get
Condition of foundation. Condition of plumbing. Condition of wiring.
Property Structure(s) and Interior
Answers and Notes
Is there an alarm system? Is it owned or leased, and will it remain after the sale?
What are the kitchen appliances, and what condition are they in? Are they all remaining with the property?
Inventory of what room furniture, fixtures, draperies, window covers, etc. are staying. Is there a garage? How large is it? How many
cars can fit inside? What condition is the garage in?
Does the property have a view, and if so, what kind of a view does it have?
Is there a fireplace, and if so, what is its current condition? When was the chimney last cleaned?
What kind of flooring? If there is carpeting, what condition is it in?
How many windows does the building have and what condition are they in?
Roof
Questions to Ask and Information to Get
How old is roof.
Any problems with roof/leakage? When? Any repair/resurfacing of roof? When?
Heating/Air Conditioning/Electrical Questions to Ask and Information to Get
Date heating system installed. Condition of heating system. Type of heating system and make. Is it
gas or electric?
Date of last heating system inspection and/or service.
Questions to Ask and Information to Get
Answers and Notes
Answers and Notes
Roof composition. Condition of roof.
Heating/Air Conditioning/Electrical
Questions to Ask and Information to Get Answers and Notes
Does the structure have air conditioning? What type of system is it? What is its cooling capacity, and what condition is the A/C system in?
Date of last A/C inspection and/or service. What type of ventilation system? Is it
acceptable?
Condition of electrical equipment. Date of last electrical equipment inspection
and/or service.
What are the monthly utility, heating, and cooling costs for both winter and summer? Is the insulation up to code?
Are there any known defects to any of these systems? Describe.
Water/Sewer
Water supply source? City, septic tank, etc. Condition of water supply.
Known prior plumbing leaks/rust problems. Any flooding? When? How was it repaired? Any drainage problems? Describe. Condition of landscape sprinklers? Describe. Type of water pipes (copper, lead, PVC, etc.). Any water pressure problems?
Known standing-water areas. Adequate drainage/roof, ground. Condition and age of water heater. Last date water heater inspected and/or
serviced?
What company did inspection? Capacity of water heater? Location of water heater?
Questions to Ask and Information to Get Answers and Notes
Available voltage.
Water/Sewer
Safety device for water heater?
Hazards
Questions to Ask and Information to Get
Are there any pending legal actions or liens? Are there any restrictions on property use? Are there any easements on the property? Is the property in a designated flood or other
hazard zone?
Are there any previous inspection reports? If so, get copies.
Are there any previous pest inspection reports? If so, get copies.
Any problems with stability of ground beneath property, settling, cracks in cement, etc.? Any known present or future problems affecting
the property?
Are there any known or future problems on nearby properties?
Is there any pending expansion or real estate development planned for the area? Is property leased? If so, when does the lease
expire?
Does anyone have a right of first refusal or option to buy after the lease expires?
Loan Information
Questions to Ask and Information to Get
Name of person or entity on title as owner. Is the current loan assumable? If it is, will
it require a purchaser to qualify? Current loan interest rate.
Answers and Notes
Home insurance.
Lender’s name.
Current loan number?
Answers and Notes
Answers and Notes Questions to Ask and Information to Get
Loan Information
Original loan amount? When granted? Balance of original loan.
Closing costs, if you assume loan? Is there a second? Can it be discounted? Are there any balloon payments due under
mortgage, and if so, how much and when? Is there any mortgage prepayment penalty? Will seller help finance or pay points? If you don’t assume, what is new loan amount? Length of new loan?
Monthly payment amount of new loan? Insurance costs and requirements for new loan?
Move-in date?
Purchase Fees
How much are application fees? How much will appraisal fees cost? How much will loan fees cost? How much will recording fees be?
Are you required to furnish a credit report, and if so, how much will that cost?
What will escrow fees be?
Questions to Ask and Information to Get Answers and Notes
Home guarantee? CC&R’s/restrictions.
Questions to Ask and Information to Get Answers and Notes
Points? How much?
What is the assessed value of the property? What is the yearly tax amount? Is that likely
to become subject to sudden increases? Review title report and title insurance.
Cash Flow Estimate and Problem Points (Make sure you verify all of the amounts in this section.)
Arrange for structural and pest inspections to confirm condition of property and establish repairs and maintenance needed so you can estimate yearly and deferred repairs. What is the current rental income for the property?
Has the property sat vacant? If so, how much rental income was lost due to vacancies? Conduct a rent check by knocking on doors and asking around in neighborhood. What have the homeowner’s insurance costs been historically? Have prior claims impacted insurance costs?
Order a C.L.U.E. report from www.choicetrust.com.
How will property management be handled, by you or by a separate management company? What are those costs?
Questions to Ask and Information to Get Answers and Notes
2. COMMERCIAL PROPERTY DISCLOSURE CHECKLIST