Pre-Close Due Diligence Checklist
Due diligence is where you verify that a deal is actually what it appears to be. Skipping steps here is how investors end up with expensive surprises. This is the checklist we use at Fairmeadow Capital for every acquisition.
Before Making an Offer
Verify rent roll against bank statements or leases
Sellers sometimes inflate rents. Ask for 12 months of bank deposits or signed leases to confirm actual collected rent.
Pull comparable sales (last 6 months, 1 mile radius)
Confirm the asking price is in line with recent sales of similar properties. Use county records, not Zillow estimates.
Check county tax records
Verify ownership, tax amount, lot size, and any liens or back taxes. Cuyahoga County has this online.
Run preliminary underwriting
Calculate cap rate, cash-on-cash, and DSCR using conservative assumptions before spending money on inspections.
Drive the neighborhood at different times
Visit during the day, evening, and weekend. Check street condition, parking, occupied vs. boarded-up properties nearby.
Under Contract (Inspection Period)
Full property inspection
Hire a licensed inspector experienced with multifamily. Budget $300-$600 for a duplex. Non-negotiable.
Sewer scope
$150-$250 and worth every penny. Sewer line replacement can cost $5,000-$15,000. Especially important on older Cleveland properties with clay pipes.
Roof assessment
Flat roofs are common on Cleveland multifamily. Get age, condition, and estimated remaining life. Budget $8,000-$15,000 for replacement.
Verify utility setup
Are utilities separately metered? If not, factor owner-paid utilities into your expense projections.
Review all leases
Check lease terms, security deposits held, any concessions, and lease expiration dates. Month-to-month gives flexibility; long-term gives stability.
Get insurance quotes
Call 2-3 agents for landlord policy quotes. Cleveland properties can vary significantly based on age, construction type, and claims history.
Verify lead paint status
Pre-1978 buildings require lead disclosure. Ohio has specific requirements for rental properties. Budget for lead risk assessments if needed.
Check for open permits or code violations
Call the city building department. Open violations can require expensive remediation and block insurance or financing.
Financing & Closing
Get appraisal ordered through lender
The bank orders this, not you. Investment property appraisals use income approach (cap rate) and comparable sales.
Review title commitment
Look for liens, easements, encroachments, or title defects. Title insurance protects you, but read the exceptions.
Set up property management
If using a PM company, have them signed before close so they can handle day-one tenant communication.
Set up business bank account
Separate all rental income and expenses from personal accounts. Required for clean accounting and tax preparation.
Arrange landlord insurance effective at close
Your lender will require proof of insurance before funding. Have the policy bound and ready.
Final walkthrough
Verify property condition hasn't changed since inspection. Check that all agreed repairs were completed.
Post-Close (First 30 Days)
Introduce yourself (or PM) to tenants
Send a professional letter with new payment instructions, maintenance request process, and contact information.
Change locks on vacant units
Standard security practice. Don't change occupied unit locks without proper notice.
Set up accounting system
Track every dollar from day one. Property-level P&L, not a combined spreadsheet. Software like Stessa is free and works well.
Create a CapEx reserve schedule
Based on inspection findings, estimate when major systems will need replacement and start reserving monthly.
File for any applicable tax abatements
Some Cleveland neighborhoods have tax incentives for property improvements. Check with the city before starting any rehab.
Estimated Due Diligence Costs
Budget $1,500-$3,000 total for due diligence on a typical Cleveland duplex or triplex. This is insurance against a $100,000+ mistake.