Legal Information Notice: This checklist provides general educational information only. It is not legal advice, does not create an attorney-client relationship, and may not apply to your jurisdiction or circumstances. Laws and deadlines vary. Do not rely on this checklist for a specific legal decision or deadline; consult a qualified attorney licensed in the relevant jurisdiction.
The property must support the debt—not merely look attractive.
2. Appreciation should not be your only repayment strategy.
3. Rental income projections can be overly optimistic.
4. Vacancy reduces actual cash flow.
5. Repairs can consume expected profit.
6. Property taxes can rise.
7. Insurance can rise dramatically.
8. Financing terms can change your entire return.
9. Interest-only payments can hide the eventual principal problem.
10. Balloon maturities create refinancing risk.
11. Debt-service calculations depend on assumptions.
12. Lenders may use their own income calculations.
13. Appraised value isn’t necessarily market sale value.
14. A high projected ROI may depend on leverage.
15. Leverage magnifies losses as well as gains.
16. Property management costs are frequently underestimated.
17. Maintenance reserves matter.
18. Capital expenditures are different from routine repairs.
19. Tenant turnover creates real costs.
20. Bad tenants can create legal and financial exposure.
21. A property can have positive rent but negative cash flow.
22. Refinancing may become harder when rates rise.
23. Selling costs can erase apparent equity gains.
24. Tax considerations can materially change the economics.
25. A property that “pays for itself” on paper may not do so in reality.
B. PREMIUM BUYER CHECKLIST
PROPERTY
☐ Purchase price
☐ Independent valuation
☐ Property condition
☐ Age of major systems
☐ Roof
☐ HVAC
☐ Plumbing
☐ Electrical
☐ Structural condition
☐ Environmental issues
INCOME
☐ Current rent roll
☐ Actual collections
☐ Vacancy
☐ Delinquencies
☐ Lease terms
☐ Tenant concentration
☐ Market rents independently checked
EXPENSES
☐ Property taxes
☐ Insurance
☐ Management
☐ Repairs
☐ Maintenance
☐ Utilities
☐ HOA/association fees
☐ Capital expenditures
☐ Legal/accounting
☐ Advertising/leasing
FINANCING
☐ Rate
☐ Term
☐ Amortization
☐ Interest-only period
☐ Balloon
☐ Fees
☐ Prepayment
☐ DSCR requirements
☐ Reserves
☐ Guarantees
RETURN ANALYSIS
Calculate:
Gross Income
minus
Vacancy + Operating Expenses + Debt Service + Capital Reserves
=
Actual Cash Flow
Then test:
☐ 10% vacancy
☐ 20% vacancy
☐ 10% lower rent
☐ 15% higher expenses
☐ Major repair
☐ Higher refinancing rate
☐ 10% lower property value
FINAL DECISION
Do not rely on appreciation to rescue weak operating economics.
FINAL QUESTION:
“Would I still want this property if its value stayed exactly the same for ten years?”