Property Investment Due Diligence Checklist
Comprehensive checklist to analyze rental properties and avoid costly mistakes
Proper due diligence is the difference between a profitable rental property investment and a costly mistake. Use this comprehensive checklist to systematically evaluate every aspect of a potential investment property before making an offer.
1Phase 1: Initial Analysis (1-2 Days)
Market Research
Comparable Analysis
Preliminary Numbers
2Phase 2: Financial Review (2-3 Days)
Income Verification
Expense Analysis
Financing Options
ROI Calculations
3Phase 3: Physical Inspection (3-5 Days)
Professional Inspection
Major Systems
Specialized Inspections
Repair Cost Estimates
4Phase 4: Legal Review (2-4 Days)
Title & Ownership
Zoning & Permits
Legal Documents
Insurance & Liability
5Phase 5: Final Decision (1-2 Days)
Final Analysis
Go/No-Go Decision
If Proceeding
Closing Preparation
⚠️Red Flags: Walk Away If You See These
- •Seller refuses to provide financials or documentation
- •Major foundation or structural issues ($50k+ repairs)
- •Title issues that can't be cleared
- •Unpermitted additions or major code violations
- •Significant environmental contamination (mold, asbestos, lead)
- •Property doesn't cash flow even with best-case numbers
- •Severe flooding history or drainage issues
- •Declining neighborhood with no signs of improvement
- •Zoning doesn't allow rental use
- •Your gut tells you something is wrong (trust your instincts!)
Pro Tips
Be Conservative
Overestimate expenses by 10-15% and underestimate rental income by 5-10%. Better to be pleasantly surprised than cash-flow negative.
Document Everything
Take photos, save emails, keep receipts. This protects you legally and helps with tax deductions.
Build Relationships
Find trustworthy inspectors, contractors, lenders, and attorneys. Good partners are worth their weight in gold.
Don't Rush
Take the full inspection period. A bad deal costs way more than a missed deal. There's always another property.
Have an Exit Strategy
Know how you'll get out (sell, 1031 exchange, hold long-term) before you get in.
Budget for Vacancy
Assume 5-10% vacancy rate even if market is hot. Every property has turnover costs.
Typical Timeline
Phase 1: Initial Analysis
Market research and preliminary numbers
Phase 2: Financial Review
Income verification and expense analysis
Phase 3: Physical Inspection
Property walkthrough and specialist inspections
Phase 4: Legal Review
Title search and regulatory compliance
Phase 5: Final Decision
Review all data and make offer
Note: This is a typical inspection contingency period. Some states allow 17-21 days. Adjust timeline based on property complexity and local market conditions.