Anyone who has been through the apartment acquisition due diligence process knows that it’s a harried affair, but it doesn’t have to be
You’re trying to collect a lot of information about a property in a very limited amount of time, and some of the inspections require entering residents’ units. You have to give advance notice and, typically, you only have 24 hours to get in and out of every unit.
Further, if something goes wrong and you need to get back into a unit to complete an inspection, that’s another big hassle. The seller may not give you that opportunity.
That’s why due diligence execution on inspection day is critical. You have to be as efficient as possible in performing these inspections, and an Excel spreadsheet just doesn’t facilitate that.
Traditionally, managing assets and acquisitions requires collecting giant binders’ worth of information. You assemble a team of people, hand out clipboards, and send them out to walk every single unit. It took hordes of people to collect all of that data.
After that, you had to transcribe all of that information into Excel or another system manually to look for anomalies in the data we collected. That is another personnel-intensive process and one that could be fraught with errors.
For all of these reasons and more, moving to a digital due diligence inspection tool is a no-brainer.
Transforming the Acquisition Due Diligence Process
With the inspection tool built into Leonardo247, your due diligence process is completely different.
All of the units are pre-programmed in the application, which is accessible from any mobile device. Also, you don’t need a wireless connection. You can download the inspections and follow the app as it leads you through each unit.
With this system in place, you can identify issues quickly and note anything that you want to review later. You can also take photos or videos of what you encounter during each inspection. This alone can cut the duration of each inspection by as much as 90 percent — and that’s just the inspection component.
Automatic Reports & Insights Instantly
On the reporting side, a digital checklist is just as transformational. Rather than transcribing all of the information manually, the data your inspectors collect exports right into the Leonardo247 due diligence interface. From there, you can:
- Download your data
- Review the information
- Scrub it as necessary
- Modify comments that you think are unclear or inappropriate
- Re-upload that data back into the Leonardo interface
This process empowers you to create a professional due diligence report instantly. You can generate a report that looks good and provides insights that you probably didn’t have time to analyze previously. You can see the most commonly deferred maintenance issues, for example, within all of the units.
From there, you can develop pricing directly from the inspection data. You can create a budget based on what you expect to spend after the property has closed. And you can get a breakdown of the finishes and fixtures in every single unit, aggregated throughout the whole property.
In short, with a digital acquisition due diligence checklist, what normally took days and dozens of people now takes two hours and a handful of people — and you get a better product instantly. And that’s just for unit-by-unit inspections.
Lease File Audits
Another key due diligence inspection is the lease file audit. Lease file audits are another ordeal that takes a number of people to get right because you don’t know what you’re going to get from the seller.
To perform a lease file audit manually, one person reads off the in-place rent, the date the lease was signed, and any of the lease charges from the rent roll. And then somebody else has the physical lease folder in front of them to see what matches and what doesn’t.
Usually, all sorts of information is missing. This can include income verification, unsigned leases, and unsigned HMO addendums. And again, that goes into a spreadsheet for additional verification, which adds even more time.
The Leonardo247 due diligence product completely changes that process. First, you upload the rent roll directly. Leonardo247 automatically recognizes different rent roll formats from Yardi, RealPage, MRI, and so on.
In the past, you had to manually extract that data and put it into a format that you can use. Someone has to sort that data by hand so you can determine what the lease says versus what the rent roll says.
Leonardo247 does all of that for you, and more importantly, it happens automatically.
Leonardo247 can read almost any rent roll that you’ll see in an acquisition process. Further, it automatically normalizes that data and so one person can review the rent roll. One person can have a lease file in front of them and the rental data is already up in the Leonardo247 interface.
Breaking Down Unit Characteristics in Your Acquisition Due Diligence Checklist
If you do find differences, you can note them quickly in the Leonardo application. And when you’re done, you get an instant report that breaks down unit characteristics, such as:
- The average age of renters in a unit
- The number of vacant or down units
- Average rent by unit
- Average lease expirations
- All of the leases that are coming up and when they expire
Everything you want to learn from a lease file audit is built into Leonardo247 and comes out in seconds.
Again, you still have the ability to scrub that data after it’s all done. If you have a number of people performing these audits, for example, people might describe things or note differences differently. You have the opportunity to scrub that data and reupload it into Leonardo 247 before you produce your final reports. It’s easy to make sure that you’re getting the final product that you’re hoping for.
A digital due diligence product like Leonardo247 saves an incredible amount of time and labor. You’ll get better, more accurate reports immediately, which is essential when you’re in the throes of the acquisition process. That’s a real game-changer.
Capitalizing on the Capital Walk
Finally, you have what some people call the capital walk. You walk the grounds, look at the common areas, and try to identify areas of deferred maintenance. The goal is to assign projected costs to those, which has been difficult and time-consuming in the past.
Leonardo247 also makes it very easy to perform that inspection. You can capture projected budget expenditures and produce another instant report. With this function in place, it’s easy to see what your expected capital expenditure at that property will be.