In today’s intensely competitive real estate market, you’re required to be more agile. Nevertheless, you should resist the urge to act quickly when attempting to hasten a deal. For property investments that you anticipate to be rewarding, it’s still possible for them to result in losses. It’s important to exercise due diligence to avoid putting your portfolio at risk.
In the initial stages, it is prudent for real estate investors and property managers to carry out financial audits before proceeding to seal any multifamily property deal.
Justification for the Financial Audit Process
Through this fact-checking activity carried out by a third party, you get to eliminate most of the assumptions you may have regarding the property. An extensive financial audit calls for at the very least;
- Three-year tracking of financials
- Scrutiny of the P&L statement and tax returns
- A perusal of utility bills and rent rolls (including the terms, deposits, payment journals, and subsidies accrued), for the current year.
Subsequently, a financial service adviser will use the derived information to evaluate the property’s operating history. Further, providing you with a detailed overview of the proposed investments’ operating income and expenditure.
In so doing, you won’t have to solely rely on the numbers provided to you by the listing agent. As a result, this allows you to make adjustments to your proforma. And thus, assisting you in reassessing the revenue-generating potential of the multifamily property before you get to close on the asset.
Eventually, the due diligence process may pose a substantial cost. But in case you’re to involve a financial lender to back your investment, you can amortize the outlay for the duration of the loan.
Indeed, with little room for error, Marquette remains the best place to work, live, and invest! Contact us for more information.Back to all posts