Due Diligence Checklist

Always get a professional inspection, plus personally check:

Structural: - Foundation cracks or settling - Roof condition and age - Attic insulation and ventilation - Signs of water intrusion

Systems: - HVAC age and function (15-20 year lifespan) - Water heater age (10-15 years) - Electrical panel condition (look for outdated fuse boxes) - Plumbing type (avoid polybutylene)

Interior: - Water stains on ceilings - Musty smells (mold indicator) - Window condition - Floor levelness

Exterior: - Drainage away from foundation - Driveway condition - Fence condition - Tree proximity to structure

Title Search Reveals: - Ownership history - Outstanding liens - Easements and restrictions - Boundary disputes - Unpaid taxes

Get Title Insurance: Protects against undiscovered claims.

Check Permits: - Were previous renovations permitted? - Open permits that need closing? - Additions built without permits?

Review HOA Documents: - Monthly fees and special assessments - Rental restrictions - Reserve fund health - Meeting minutes for issues

Verify Zoning: - Current zoning classification - Allowed uses (can you add a unit?) - Any upcoming zoning changes

For Existing Rentals: - Copies of all leases - Last 12 months rent rolls - Security deposit amounts - Tenant payment history - Utility bills (if owner-paid) - Property tax bills - Insurance quotes

Red Flags: - Above-market rents (may not be sustainable) - Month-to-month tenants (flight risk) - Deferred maintenance - High tenant turnover - Missing documentation

Verify Everything: - Call tenants to confirm rent amounts - Get estoppel certificates signed - Review actual bank deposits, not just claimed rents

Lead Paint (Pre-1978 Properties): - Disclosure required by law - Testing recommended for family rentals - Renovation requires certified contractors

Asbestos: - Common in pre-1980 construction - Usually fine if undisturbed - Removal is expensive if required

Mold: - Look for water damage history - Musty smells warrant testing - Can be costly to remediate

Radon: - Invisible, odorless gas - Testing costs ~$150 - Mitigation costs $800-1,500

Flood Zone: - Check FEMA flood maps - Flood insurance significantly impacts cash flow - May be required by lender

Neighborhood Research: - Drive the area at different times - Talk to neighbors - Check crime statistics - Review school ratings - Look for development plans

Rental Market: - Current vacancy rates - Competing listings - Rent trends - Tenant demographic

Future Factors: - Planned developments - Infrastructure projects - Major employer changes - Zoning modifications

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