April 4, 2014
Due diligence is of essential importance, because if investors do not do their due diligence in regard to multifamily loans, they can lose valuable money and time – and may even lose their opportunity to purchase the great apartment building they've been dreaming about.
Due diligence is of utmost importance in every step of acquiring an apartment building: from being knowledgeable about multifamily properties, to choosing a viable multifamily complex, to the final steps of owning the property.
The inexperienced apartment investor might skip over vital steps, which could prove terribly costly. Even the experienced apartment investor needs to think due diligence to the point that it is a mantra. Why? Because requirements, conditions, codes, etc. are always in a state of change.
Also, an experienced investor may be exploring a new direction in multifamily investing—for example, moving from investing in existing properties to investing in new construction. These two types of apartment investments are like two different planets, vastly different.
When it comes to due diligence on apartment loans, there is the gamut between excellent and reliable lenders to those who pose as multifamily lenders but are actually scam artists.
Do careful due diligence on the company you choose to do your apartment loan with. Ask for references—multifamily investors who have purchased a loan from them. If the lender hesitates to give you references, “Get out of Dodge.” Select another loan source.
I recently checked out a lender our company was not familiar with. As a loan source, we have to be sure we are very careful in selecting very good lenders. I asked for references and talked to seven of them. They all raved about this particular lender, and the lender earned my trust.
Check with the Better Business Bureau for a lender's rating. Our company has an A+ rating with the Better Business Bureau. As far as references, we have about 20 people an investor can talk with. We usually furnish three or four to start with, but you can request more.
Remember to think due diligence when it comes to any part of ownership of apartment buildings, including selection of your property and apartment financing. You will save time and money, plus you are likely to have less stress, which is of great value.
Happy apartment selecting and financing.
Bruce Painter, Director of Marketing