Due diligence is the period between signing a purchase contract and closing — your window to verify everything you assumed when you made the offer. It's where deals get saved or killed. Inexperienced investors rush through it; experienced investors use every day of it. A $500 inspection that uncovers a $40,000 foundation problem is the best money you'll ever spend. This checklist covers what every investor must do — and what most beginners skip.
Phase 1: Financial Due Diligence
Before touching the physical property, verify the numbers the seller presented:
- Rent roll verification: Compare leases to actual bank deposit records. Request 12 months of rental income statements. Sellers sometimes inflate occupancy or list below-market rents with side agreements.
- Expense verification: Request actual bills — utility invoices, insurance, property tax statements, maintenance receipts. Seller pro formas routinely understate expenses.
- Deferred maintenance assessment: What capital expenditures are looming? Roof age, HVAC age, plumbing material, electrical panel condition — each is a time bomb that should be priced into your offer.
- Tenant quality review: Check payment history. Are any tenants on month-to-month? Are any in default? What do current leases say about security deposits?
Phase 2: Physical Inspection
Never waive inspections. The savings rarely justify the risk:
- General inspection: Hire a licensed inspector for a complete structural and systems review — $400-$600 well spent
- Roof inspection: Separate from general inspection; roof replacement costs $8,000-$25,000+
- Sewer scope: $150-$300 to camera the main line — tree roots and collapses are common and expensive
- HVAC inspection: Age, condition, remaining useful life, any recent service history
- Electrical: Knob-and-tube, aluminum wiring, and under-sized panels are red flags
- Foundation: Cracks, settlement, water intrusion — can range from cosmetic to structural
- Environmental: Pre-1978 construction — test for lead paint and asbestos before any renovation
Use Inspection Results as Leverage: Inspection findings aren't just protection — they're negotiating tools. A $12,000 HVAC replacement finding is a legitimate reason to renegotiate price or request seller credits. Don't just use inspections to decide whether to buy — use them to get a better deal.
Rerun Your Numbers After Inspection
After your due diligence findings, update your repair estimates and recheck the deal. The Property Analyzer makes it instant.
Open Property Analyzer →Phase 3: Title and Legal Review
- Title search: Verify clear title — no liens, judgments, easements, or encroachments that could cloud ownership or limit use
- Survey: Confirm property boundaries, especially on rural or commercial properties
- Zoning verification: Confirm the property is zoned for your intended use (rental, ADU, conversion)
- HOA review: If applicable, review CC&Rs for rental restrictions, STR prohibitions, or pending special assessments
- Permit history: Pull permits from the city/county. Unpermitted additions are your liability post-close — not the seller's.
Phase 4: Market and Rental Due Diligence
Verify your income assumptions against actual market data — not just the listing agent's claims:
- Pull comps for rented properties in the same area and condition — not just listed rentals
- Check vacancy rates on Zillow, Rentometer, or by calling local property managers
- Verify neighborhood trajectory: school ratings, crime trends, new construction, employer presence
- For multifamily, check what market-rate rent comps are — if current rents are below market, there's upside. If above market, you're taking on risk.
Use PropStream to pull deep market comps, verify ownership history, and check for liens or distress indicators before and during your due diligence period.