Due Diligence
Due diligence means conducting investment property research to determine profit potential and stability. Done properly, it can be a long and potentially tedious process that involves knowledge and attention to detail.
Meridian Pacific Properties performs meticulous due diligence for our clients, so they don't have to. Our extensive 20 years of experience allows us to analyze each property on the following criteria:
- Location – See Why Memphis
- Condition
- Property Management and Tenants
- Pro Forma Financial Performance
- Trusted Service Providers
Location
We physically visit Memphis every month to meet our local team, real estate experts, identify the best zip codes, subdivisions, neighborhoods, and streets. We make sure each property has specific key attributes (and characteristics that we seek to avoid).
Condition
Once we establish our target property area, we select an average of one out of 20 homes we review. We conduct a pre and post-renovation physical inspection to ensure each property meets the highest standards for:
- Cosmetic appearance, inside and out
- Structural integrity: framing, walls, and roof
- Systems: electrical, plumbing, and HVAC
- Painting, flooring, countertops and fixtures
- Landscaping and outdoor structures
Property management and Tenants
Long term investment property success relies on a successful property management relationship. All Meridian recommended property managers meet our highest quality standards for performance. We have examined their management agreements, leasing agreements, tenant qualification criteria, fee schedules, and accounting systems to our satisfaction. We are especially mindful of the property manager’s track record for vacancy performance, a key cash flow component.
Pro Forma Financial Performance
Each investment property meets our strict financial performance standards before we consider acquiring and renovating them. We carefully examine and financially model all income properties to determine the investment pro forma returns. These are measured by the cash-on-cash return 5-year internal rate of return (IRR). Our property brochures include all elements (purchase price, prevailing interest rate, monthly rent, vacancy and maintenance allowances, property taxes, insurance rates, mortgage payments, appreciation rate, expense inflation rate, closing costs and sales costs). Many of these meaurements are omitted by our competitors.
Quality Service Provider Referrals
We evaluate several service providers who ensure successful investment property returns. These providers include competitive lenders, title and escrow companies, construction contractors, insurance brokers, property inspectors and appraisers. We evaluate all recommended service providers on their professionalism, competitive rates, quality of service and communication.
Meridian Pacific Properties is known for its integrity and attention to detail, and is well known for its meticulous due diligence.
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This Week's Question
The simple answer - because the numbers work. When we studied over 366 metropolitan statistical areas for the best investment property criteria, Memphis came out as a top performer in a variety of key areas.