What Is Good Due Diligence?

Effective due diligence is information collected prior to purchasing a property that accomplishes the following:

1. Results in changes to the business plan resulting more rapid increase  in revenue.
2. Results in changes to the business plan resulting in greater final revenue than was anticipated.
3. Results in changes that assure the project is fully funded for capital improvements and operations.
4. Results in changes to  the operation and marketing plan finally reducing on going operational costs.
5. Results in information that improve the appraised value on an “as is” and “as improved basis”.
6. Results in information that will prevent a non-performing purchase.

As an investor, you should be measuring your projects against these issues and determining changes to your due diligence plans to meet these goals

Due Diligence is More than Collecting Reports and Info

Much of the current debt debacle is a function of investors collecting information and checking off boxes.  Due diligence is not an exercise.  Diligence is a process.

Effective due diligence requires analysis to verify revenue potential, expense assumption, market demand, and on and on.  We will look more closely into the required efforts to collect the necessary information, to ferret out the needed facts and factors, and to finally analyze, assess, and plan to mitigate risk, assure value, identify and capture opportunity, and achieve investment goals.

2010 Multifamily Due Diligence Discussion Overview

Earlier today, I completed a post outlining critical due diligence areas for investors.  I will be using this broad “outline” of topics to guide and complete a detailed review of critical investor due diligence considerations.

If any would like to participate in this, please offer comments to the original article or as we cover items, I’ll be happy to add and credit your thoughts as part of the broader dissection of multifamily  investor due diligence.  Selecting investments in the  apartment industry is a complex and broad area covering much more than the initial review that I have offered.

Additionally, I will be reposting the original article from time to time as I identify and add more subjects to the outline that I’ve overlooked so far.