Due Diligence in Real Estate: 11 Things Rental Property Investors Must Do

If you’ve ever toured a rental property and felt that little rush—this could be the one—you’re not alone. Deals are exciting. But the part that quietly decides whether a property becomes a wealth-builder or a monthly headache happens after the offer is accepted.

That window is due diligence.

This is where you verify income, uncover hidden costs, confirm legal compliance, and spot the repairs the listing photos politely didn’t mention. Steadily frames this well: for rentals, financial due diligence matters just as much as the physical inspection, and you should be reviewing at least a year of rent and expense records—not just what the seller says “it usually does.”

Below are 11 due diligence steps we recommend for rental property investors who want fewer surprises and stronger long-term cash flow.

1) Start with your numbers (and be honest about your assumptions)

Before you chase documents, tighten your underwriting. What rent are you using—current, market, or “maybe someday”? What vacancy rate are you assuming? Are you including repairs, CapEx reserves, management, and turnover costs?

A quick reality check here prevents the most common investor mistake: forcing a deal to work because you want it to work.

2) Validate demand where it actually matters

“Good area” is vague. What you want to know is: will qualified tenants want to live here at your target rent?

Look for demand signals that show up in real life:How fast comparable rentals lease, what kind of tenant profiles the neighborhood attracts, how parking works on a Tuesday night, and whether the property is convenient for typical commutes.

3) Confirm market rent with real comps, not optimism

Market rent isn’t what the nicest renovated unit in town got last summer. It’s what your unit can earn in its current condition within a reasonable leasing timeline.

When you run comps, separate them by condition. If your unit is “livable but dated,” don’t price it like a fresh renovation unless you’ve already budgeted the renovation and timeline.

4) Verify rental income like a lender (because your lender will)

This step saves people tens of thousands. Ask for the rent roll, leases, and proof of payment history. Steadily specifically calls out verifying claimed rental income with bank statements and signed leases.

Here’s the short list of what you want in your file:

• Current rent roll

• Signed leases for every unit

• Payment ledger or deposit history (12 months is ideal)

• Security deposit records and where they’re held

• Any notices, arrears, payment plans, or pending evictions

If something doesn’t match, don’t “assume it’ll get cleaned up.” Price the risk or renegotiate.

5) Normalize expenses using at least 12 months of reality

Rent is only half the story. Expenses are where investors quietly bleed.

Review:Property taxes, insurance, utilities (especially if anything is owner-paid), repair history, and any service contracts like pest control, landscaping, snow removal, cleaning, or fire alarm monitoring.

Also plan for increases—because many operating costs don’t stay flat for long.

6) Get a quality inspection… and remember what inspections don’t do

A home inspection is valuable, but it has limits. InterNACHI notes an inspection is not technically exhaustive and doesn’t involve disassembling systems.

On older rentals, I like to add a few targeted checks. Sewer scope, roof condition, pest, radon, and a specialist look at the major systems can reveal the stuff a standard inspection might miss. You don’t need a flawless building—you need fewer surprises.

7) Build a CapEx plan before the building forces one on you

Even good properties need long-term replacements: roof, boilers, water heaters, windows, exterior stairs, paving, common area finishes.

During due diligence, create a basic CapEx roadmap with estimated remaining life and rough replacement costs. You don’t need to be exact—you need to be prepared.

8) Check lead paint risk and renovation rules (especially pre-1978)

If the property was built before 1978, lead paint is a real due diligence item.

Federal requirements apply around lead disclosure in pre-1978 housing. EPA’s “Protect Your Family From Lead in Your Home” explains that sellers must disclose known information, contracts need a lead warning statement, and buyers generally have up to 10 days to conduct a lead inspection or risk assessment.

And if you plan to renovate, EPA’s Renovation, Repair and Painting (RRP) program requires that certain work disturbing lead-based paint in pre-1978 homes be done by lead-safe certified contractors.

This isn’t meant to scare you. It’s just one of those things that can hit your wallet and your timeline if you don’t plan for it—especially if you’re renovating. Know the rules, price it in, and you’ll be fine.

9) Review tenants and your screening process through a legal lens

If the property comes with tenants, don’t treat the leases like background noise—read them like they’re part of the building. Confirm who pays what, when renewals happen, what late fees are allowed, and whether there are side agreements (like storage, parking, or ‘they pay on the 20th’ arrangements) that aren’t written down but everyone acts like they’re real.

For screening new tenants, the biggest protection you have is consistency. Use the same written standards for everyone, follow the same steps every time, and keep notes on decisions. The Fair Housing Act also matters here—HUD explains it prohibits discrimination based on race, color, national origin, religion, sex, familial status, and disability—so your process needs to be objective and applied evenly.

Document your criteria, apply it evenly, and keep your process clean.

10) Confirm title, unit legality, and any “surprise” issues on paper

This is where your attorney and title company earn their keep.

Make sure the paperwork matches the pitch. Confirm liens and easements, and double-check that the unit count is legally recognized. If someone says ‘bonus unit in the basement,’ verify what that really means before you price the deal around it.

11) Get insurance quotes early and check flood risk before closing

Insurance is not a last-minute task anymore. Get quotes during due diligence, not after you’ve mentally moved into the deal.

Also check flood risk on FEMA’s Flood Map Service Center, the official source for flood hazard information tied to the National Flood Insurance Program. If the property is in a flood zone, insurance requirements and pricing can change your numbers fast.

Closing thought: due diligence is where investors make their money

Not because it’s glamorous—because it’s where you turn assumptions into facts.

If you want help pressure-testing a deal, Marcel Wynn can support you with a due diligence document checklist, rent/expense review, and a realistic operations plan so the property runs smoothly after closing.

Drop a comment with what you’re buying (2-family, 3-family, mixed-use, etc.), or reach out to get our checklist.