Due Diligence – What is it and why is it important?
A behind the scenes look at the REEP Due Diligence Process
If you are new to real estate investing, the term due diligence may not be familiar to you. However, it refers to an important process that works to safeguard the investment you are about to make.
What is Due Diligence?
Due diligence is an investigation process providing an in-depth look into the physical condition and the financial standings of the property you are about to purchase or invest in. Much like a residential home inspection, the goal is to identify any previously unknown issues. However, in the case of a multifamily purchase, this inspection also includes the business and financial aspects of the property.
Why is it important?
Nobody likes to be surprised by issues when they are about to invest their hard-earned money. By digging deep into every aspect of the property, REEP can confidently close on the property with a full understanding of what we are purchasing both from a physical and business aspect. This process ensures that we are buying a property that is a good fit for both our investors and for our portfolio.
How does this process work? Let’s take a behind the scenes look at the REEP Due Diligence process.
With over 10 years in the industry as a vertically integrated company, we have developed and fine-tuned our due diligence procedure. Our process not only validates the property we are purchasing but it also prepares our teams to make a difference on-site on Day 1. We call this the REEP Day 1 Difference.
Preparation for Day 1 of REEP Ownership
Prior to the due diligence window beginning our teams are already hard at work preparing for the inspection. By the time this window opens, we have already contacted all our tried-and-true vendors and discussed our needs. We then schedule each vendor to join us for a site walk. Based on their specialty, each vendor will provide an inspection report. Additionally, if the business plan calls for it, they will go ahead and bid any planned property upgrades.
The vendors include
- Plumbing and Sewer Lines
- Roofing
- Foundation
- Sprinkler Systems
- HVAC
- Pool and Pool Equipment
- Electrical
- Fences/Gates and Landscaping
- Paint
After vendors conduct their inspection, they turn in their reports and provide their bids to our due diligence team. These bids allow us to be ready on Day 1 to begin immediate repairs and to begin executing the improvement plans right away. While the vendors are touring the property, our teams walk every unit to verify occupancy and condition.
On the financial side, the team conducts a lease file audit. The analysis provides details on the current renters – looking at occupancy levels, income levels, and nearby market rents. The team also looks at the property’s expenses and service contracts. The reports are thoroughly reviewed to confirm the property aligns with our business plan to move forward.
This process is an integral part of the onboarding of a new property allowing us to expedite the proper updates and improvements as soon as REEP Equity becomes the owner.
REEP aims to be as fast, reliable, and careful as possible.
Our REEP Residential team has perfected this inspection process. Through careful pre-planning we are able to provide quality inspections with minimal disruption to the residents in a very short period of time.
One key tool that helps the team achieve a timely due diligence investigation is the implementation of technology. By using an inspection app, our team is able document needed renovations, unit conditions, and organize the workflow of vendors. This adds a layer of reliability and confidence in communication throughout the team, while also providing valuable data to help the team prepare for onboarding the property.
How does this benefit investors?
You can confidently invest your money in REEP properties knowing we have conducted the proper due diligence inspections. Transparency is key to building a trusting relationship. We provide the details of our findings during our webinar for each property so you can feel secure in where you are investing your money.
Due diligence reports instill assurance of smart investment opportunities and weed out the opportunities that fall short of growth or a business plan. Whether you’re investing with us or elsewhere, it is important to know that a proper due diligence inspection was done and what the findings were. By having our in-house REEP Residential team and experienced vendors inspect every property we offer to our investors, we provide an extra layer of assurance to our investors that we have confirmed that the offering is a great addition to your portfolio.
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