Thorough due diligence on an apartment building protects buyers from costly surprises after closing. This checklist covers everything you need to review before purchasing LA multifamily property.
Why Due Diligence Matters
Proper due diligence on an apartment building is your opportunity to verify everything the seller has told you and uncover issues that could affect value or your ability to operate the property. In Los Angeles, with its complex regulations and older building stock, thorough due diligence is essential.
Here’s a comprehensive checklist organized by category.
Financial Due Diligence
Rent Roll Verification
- ☐ Current rent roll with unit numbers, tenant names, move-in dates, lease terms
- ☐ Verify rents match actual lease agreements
- ☐ Confirm security deposit amounts
- ☐ Check for any rent concessions or side agreements
- ☐ Review tenant payment history (who pays late, who doesn’t pay)
- ☐ Identify month-to-month vs. fixed-term leases
Income & Expense Review
- ☐ Trailing 12-month (T-12) operating statement
- ☐ 24-month history if available
- ☐ Verify income against bank statements
- ☐ Review utility bills (12+ months)
- ☐ Property tax bills and any pending reassessment
- ☐ Insurance policy and claims history
- ☐ Service contracts (landscaping, pest control, etc.)
- ☐ Management agreements
Legal & Regulatory Due Diligence
Rent Control & RSO
- ☐ Confirm RSO status with LA Housing Department
- ☐ Review RSO registration and compliance history
- ☐ Check for any pending LAHD complaints or cases
- ☐ Verify allowable rent levels for each unit
- ☐ Review any capital improvement pass-through applications
- ☐ Understand relocation obligations if applicable
Title & Legal
- ☐ Preliminary title report
- ☐ Review easements, CC&Rs, encumbrances
- ☐ Verify legal lot and zoning
- ☐ Check for any liens or judgments
- ☐ Survey (if not recently done)
- ☐ Review any HOA documents if applicable
Permits & Compliance
- ☐ Certificate of Occupancy
- ☐ Permit history from LADBS
- ☐ Check for unpermitted work or additions
- ☐ Soft-story retrofit compliance (if applicable)
- ☐ Fire/life safety compliance
- ☐ ADA compliance for common areas
Physical Due Diligence
Property Inspection
- ☐ Professional property inspection report
- ☐ Roof inspection and remaining life estimate
- ☐ Plumbing inspection (especially for older buildings)
- ☐ Electrical panel and wiring assessment
- ☐ HVAC systems condition
- ☐ Foundation and structural review
- ☐ Parking area and exterior condition
Unit Inspections
- ☐ Interior inspection of all (or representative sample of) units
- ☐ Appliance condition and age
- ☐ Flooring, cabinets, fixtures condition
- ☐ Signs of water damage or mold
- ☐ Window and door condition
- ☐ Smoke/CO detector compliance
Environmental
- ☐ Phase I Environmental Site Assessment
- ☐ Lead-based paint disclosure (pre-1978 buildings)
- ☐ Asbestos survey if suspected
- ☐ Mold inspection if signs present
Tenant & Lease Due Diligence
- ☐ Copies of all leases and addenda
- ☐ Estoppel certificates from tenants
- ☐ Tenant contact information
- ☐ Any pending evictions or legal disputes
- ☐ Section 8 or other subsidy documentation
- ☐ Pet policies and any pet deposits
Insurance & Risk
- ☐ Current insurance policy review
- ☐ Claims history (past 5 years)
- ☐ Flood zone determination
- ☐ Earthquake insurance availability and cost
- ☐ Liability coverage adequacy
Market Due Diligence
- ☐ Comparable sales analysis
- ☐ Comparable rental analysis
- ☐ Neighborhood trends and development pipeline
- ☐ Crime statistics
- ☐ School ratings (affects tenant pool)
- ☐ Transit and walkability scores
Red Flags to Watch For
- Incomplete records: Missing leases, gaps in financials
- Deferred maintenance: Signs of neglect throughout
- Unpermitted work: Additions or conversions without permits
- Tenant issues: Multiple complaints, pending litigation
- Environmental concerns: Underground tanks, contamination history
- Title problems: Unclear ownership, unresolved liens
Due Diligence Timeline
Typical contingency periods in LA:
- Physical inspection: 15-17 days
- Full due diligence: 21-30 days
- Loan contingency: 30-45 days
Don’t rush. It’s better to extend contingencies than to close with unresolved questions.
Quick FAQs
Q: Who pays for inspections?
A: The buyer typically pays for all inspections and reports during due diligence.
Q: What if I find problems?
A: You can negotiate repairs, credits, or price reductions—or cancel the contract if issues are significant.
Q: Should I inspect every unit?
A: Ideally yes, but at minimum inspect a representative sample and any units with known issues.
Thinking about buying an LA apartment building? Contact me to discuss what to look for in your target market.
Proper due diligence on any apartment building is non-negotiable for smart investors. Whether buying or selling, I can help ensure nothing is overlooked in the transaction.