Property Acquisition Due Diligence Checklist

Order the title commitment from the chosen title company and an ALTA/NSPS survey from a licensed surveyor. The Schedule B-II exceptions and the survey's Table A items are where most acquisition surprises hide — easements crossing parking, encroachments, recorded use restrictions.

Pull the zoning verification letter from the municipality. Watch for legal non-conforming use — a 24-unit building in a zone now capped at 12 units may be unrebuildable after a casualty without a variance, which materially affects insurance and financing.

Walk Schedule B exceptions with counsel. Mechanics liens, recorded covenants, shared-driveway easements, and HOA assessments all survive closing unless cleared. Document each item as accept, cure, or kill-the-deal.

Send the formal objection letter within the contract's title review period. Track which items the seller agrees to cure at closing versus which the buyer accepts. Missing the objection deadline waives the right to object — calendar this from the effective date.

Reconcile the T-12 P&L against the trailing-3 and trailing-1 rent rolls. Look for one-time income (lease-up concessions burning off, retroactive escalations) being underwritten as recurring. Compare GPR, economic vacancy, and bad debt against the broker's offering memorandum.

Send tenant estoppels confirming rent, deposit, lease term, and any side agreements. Reconcile each estoppel against the lease abstract — undisclosed concessions, verbal pet agreements, and unrecorded rent reductions surface here. For commercial, watch for exclusive use clauses that bind future leasing.

Pull the assessor's record and confirm whether the sale will trigger reassessment (CA Prop 13, MI Prop A, FL save-our-homes resets do not apply to commercial). Get a quote from the firm's insurance broker rather than rolling the seller's premium — coastal, wildfire, and older-construction premiums have moved sharply.

Build year-1, year-3, and stabilized pro formas using the audited rent roll, market rents from the comp set, and verified opex. Compare implied cap rate to recent closings — not list prices — for similar vintage and submarket. Flag any line item where the seller's number deviates more than 10% from independent verification.

Hire a licensed engineer to deliver an ASTM E2018 PCA. The PCA's Immediate Repair table feeds the closing credit ask; the Reserve table feeds your capex pro forma. For lender-financed deals, confirm the lender's approved engineer list before engaging.

Walk the roof with the inspector — TPO seam separation, flashing failures, and ponding water are the recurring expensive surprises. Pull HVAC ages from nameplate data; a chiller or boiler in the last 20% of useful life belongs in the year-1 capex plan, not deferred.

The ASTM E1527-21 Phase I is required by virtually every institutional lender and preserves the CERCLA innocent-landowner defense. Watch for adjacent dry cleaner, gas station, or auto repair use in the historic record — common Phase II triggers.

Soil borings, groundwater sampling, or vapor intrusion assessment as recommended by the Phase I. Negotiate access agreement and seller cost-share before drilling. Phase II results often reset the contract economics — extend the inspection period if needed rather than waiving prematurely.

For pre-1978 buildings, lead-based paint disclosure obligations transfer with the property. Pre-1980 construction warrants asbestos sampling of suspect materials (floor tile, pipe insulation, popcorn ceiling). Mold remediation cost is rarely small once it's behind drywall.

Identify termination notice period (often 30-90 days) and any tail-fee provisions. If retaining onsite staff, verify wage rates, accrued PTO, and any union/CBA obligations. WARN Act notice may apply for larger properties with significant staff transitions.

Inventory landscaping, pest, elevator, fire/life-safety, trash, and laundry contracts. Flag auto-renewing contracts with long termination windows — laundry-room leases famously run 7-10 years and can survive sale. Confirm COI naming the property as additional insured for every active vendor.

Roll the PCA Immediate Repair table, deferred maintenance from inspection, and any value-add scope into a sequenced 12-month plan. Distinguish capex (depreciated) from R&M (expensed) for the owner's tax basis. Tie unit turn assumptions to actual lease expirations from the rent roll.

Build the abstract: term, base rent, escalations, options, security deposit, guarantor. For commercial tenants, capture exclusive use, co-tenancy, kick-out rights, and CAM reconciliation method. Concentration risk — a single tenant over 20% of GPR — drives lender debt sizing.

Reconcile every tenant's deposit and last-month rent against the seller's trust account. The buyer assumes deposit liability at closing under most state landlord-tenant acts; missing money becomes the buyer's problem. Capture as a closing credit, not a handshake.

For HCV units, verify current HAP contract and most recent HQS inspection. For LIHTC properties, pull income certifications and any IRS Form 8823 noncompliance reports — uncured 8823s travel with the property and can cost the new owner credits. Don't underwrite a LIHTC deal without a compliance specialist on the team.

Pull 5-8 comparable properties from CoStar, Yardi Matrix, or Apartments.com — same vintage, similar amenity tier, within the legitimate submarket. Walk at least three to verify finish level. Asking rents on listings overstate achieved rents by 3-7% in soft markets; use leased comps when available.

Use Census ACS, BLS QCEW, and ESRI Tapestry for the 1-3-5 mile rings: median household income, renter share, employment growth, top employers. Property-level rent affordability of 30% of median renter income is a useful sanity check on year-3 rent growth assumptions.

Check the local planning department and Yardi Matrix or CoStar pipeline reports for units under construction and permitted within the submarket. Heavy supply delivering during your year-1 lease-up flattens rent growth — the most consistently underestimated line item in deal models.

Package the diligence memo: legal exceptions, financial variance to underwriting, PCA and ESA findings, lease abstract summary, market position, and the recommended price/credit ask. IC needs the issues raised and the recommended path — proceed at price, retrade, or terminate — not just a data dump.

If retrading, send the price-reduction request with diligence backup before the inspection-period expiration so termination remains a fallback. If terminating, deliver written notice within the contract window to recover the earnest money deposit. Late notice forfeits the deposit.

Confirm deed form, transfer tax, FIRPTA certificate, bulk sales notice if applicable, prorations (rent, taxes, deposits, prepaids), and assignment of leases and contracts. Schedule wire and confirm utility transfer date so the day-of-close handoff to operations is clean.