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  • Steven Fletcher

Layering Inputs

Before taking any leaps into real estate, it's crucial to conduct thorough due diligence to uncover potential pitfalls, your angle to add value, and the process it entails.

This just means: you need to find out what’s wrong with the property and the plan to resolve it (if you can), all while moving quickly.

Some key steps we've found helpful:

1.) Market Research: Analyze trends in property values, rental rates, and vacancy across streets AND neighborhoods.

A lot can change in a quarter mile stretch- the property might be on the exterior of the corridor you’ve studied and thus, won’t fetch the market rents for that area.

Don’t get caught in the wrong location.

2.) Physical Inspection: Even before the in-person inspection, review all current/historic listing photos and property maps that show the parcel.

When was the last time renovations were done (pull permit records, this is also included in the legal section below)?

If the property hasn’t been renovated in over 40 years, you may be dealing with cast iron plumbing and knob and tube wiring- have a plan.

What was the scope of the last renovation?

Was there a fire, flood, or any other event that triggered it?

How many electric, water, and gas meters are on the property?

How many water heaters, HVAC systems, etc?

What is the fuel source for the water heaters, HVAC, etc. ?

We’re trying to determine if units are separately metered with their own MEP.

Engage contractors in the inspection period to assess structural integrity, electrical wiring, plumbing, HVAC, and any other potential issues.

Get these priced out.

3.) Legal Due Diligence: Consult lawyers to review zoning regulations, property titles, legal encumbrances (liens, easements, covenants).

Pull all permits associated to ensure you’re not inheriting un-permitted work.

If the electrical wiring is newly roughed-in and there’s no permit, you can bet you’ll be dealing with that at some point in the future.

Lastly, ensure you’re able to execute your desired scope of work.

Zoning and variance legislation can change, make sure you're fully informed.

4.) Environmental Concerns: Any history of contamination or nearby environmental hazards could impact value.

Things like: underground tanks, asbestos, mold, groundwater issues, etc.

Have a plan for tests, remediation, or to walk away.

5.) Future Development Plans: Research upcoming infrastructure projects or developments in the vicinity.

While these can enhance the property's value, they could also introduce competition or disrupt the neighborhood's dynamics.

If there’s a brand-new apartment complex across the street with state-of-the-art amenities, it’ll likely affect your rental rates.

If they build an oil refinery across the street from your building, it’ll likely affect your property value.

The more information you can source, the more you can cross reference, and ultimately better position yourself to succeed.

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