5 Due Diligence Items for the Passive Investor
Updated: Nov 10
Depending on how many deals you’ve done with a sponsor, you may feel completely comfortable with the information they send and not feel the need to do a quick double check. If, however, you’d like to do at least a high level check of the opportunity being presented, here are 5 quick things you can do to check out a deal:
Search the ‘city_name and crime’ - this will tell you if the overall city is experiencing abnormally high crime rates and should potentially be avoided
Search the ‘property_name and crime’ - have there been any recent major crimes on site? Tenants are aware of these things and it will have an impact on the rent/vacancy/applications received.
Search the ‘city_name and population’ - it’s good to know if the population is growing in a city. This will help drive rents. If there’s a mass exodus from a city, or a major employer just shut down, it’s a safe bet that rents and property values will decline over time.
Head over to Apartments.com
This is a quick way to check the rents for the subject property and surrounding properties to make sure the rents are close to what you’re being told they are by the sponsor.
Do a quick search of the proposed property management company. How many units do they have under management? How long have they been in business? Do they operate any other properties in the market or is this the first one?
Armed with this information, you will be able to have better conversations with the sponsor to determine if this asset, in this market, is the right fit for you and your investment goals.
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About the Author
Randal is the founder of Ridgeline Investment Group, a real estate company specialized in multifamily investing. At Ridgeline Investment Group, Randal helps investors grow their wealth and achieve double-digit returns by investing alongside him in exclusive multifamily deals they usually don't have access to.
He started his career as a single family real estate investor where he flipped over 500 properties. He’s been a licensed real estate Broker for 10+ years and has recently been featured in Forbes. He’s a member of the Urban Land Institute where he sits on the ULI Next and ULI Neighborhood Development committees. He’s committed to entrepreneurship and works with local business owners as a volunteer mentor with SCORE. Randal is an experienced entrepreneur who has helped build and scale multiple companies.
Randal holds a BA in Political Economy from Tulane University in New Orleans.