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If you’re planning on leaping into multifamily investments in a competitive market like Boston, you’ll need to create a process for performing due diligence on a property. You can protect yourself from a long list of potential pitfalls by knowing how to fully assess a multifamily home for sale in Boston. By creating a checklist to perform due diligence, you can evaluate both the physical and financial aspects of the property in question.

Many of the items on the multifamily due diligence checklist are required by the lender once the property is under contract. Some are not required by the lender but are important for evaluating the property for potential profitability and/or losses. Be sure to include these items in your due diligence checklist:

1. Local Market Analysis

This should be one of the first items you check before you start making offers on multifamily properties in any location. Understanding the economic aspects of a particular housing market can help you assess not only the current property values but also potential appreciation over time.

You should research population growth, unemployment rates, household income growth, average rent prices, home prices, and crime rates. Analyze these data from a historical perspective to see if a housing market is progressing or regressing. Look up who the largest employers are and look for any news of new companies expanding into the area. This can help you spot under and over-valued multifamily properties in any market.

2. Property Condition Assessment

The property condition assessment (PCA) is performed by a third-party agent once a commercial or multifamily property goes under contract. Most lenders require this before financing a multifamily investment. The agent is looking to examine the condition of a property and estimate both current and future maintenance costs. In some cases, the PCA will be used by the lender to determine if and how much the buyer has to hold for replacement reserves, which are…

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