Due Diligence Checklist for Small Multifamily Properties (2-4 Units)

I bought a fourplex in Memphis in 2022. Skipped the sewer scope. "The main line looked fine from the street," the listing agent said. Six months later, Unit 3's toilet backed up into the bathtub. The plumber ran a camera. The main line was 60% collapsed — tree roots, cracked pipe, the works. Replacement cost: $18,200. I'd paid $450 for a scope on my next deal. That scope found the same problem before I closed. I walked. Same city. Same vintage. Different outcome.

That fourplex taught me something: due diligence on small multifamily isn't optional. It's the difference between a deal that prints and one that bleeds. I built a 27-point checklist. I run it on every duplex, triplex, and fourplex now. Here's the full list.

Why Multifamily Due Diligence Is Different

Two units or four — you're not buying a house. You're buying multiple roofs, multiple HVAC systems, multiple tenants, and one shared sewer line. More doors means more things that can go wrong. And sellers? They'll show you pro forma rent. "Market rate" for a 2-bed in that zip code. What they won't show you, unless you ask: the actual rent roll. The one with the $200 concession on Unit 2. The one with 47 days vacant last year.

Pro formas inflate income by 15–25% on average. I've seen it in Cleveland, Indianapolis, Kansas City. Every market. The cap rate you're underwriting — NOI divided by price — is only as good as the NOI you're plugging in. Garbage in, garbage out.

The Income Verification Trap

Request 24 months of actual rent rolls. Not estimated. Not "what we could get." What they collected. Month by month. Unit by unit.

Utility bills matter. Who pays water? In a fourplex with master-metered water, you're on the hook. One leaky toilet and your water bill can spike $400 in a month. I've seen it. Split the difference: ask for 12 months of utility bills. Gas, electric, water, sewer. If the seller won't provide them, that's a red flag. Not a deal-killer by itself — but it means you're underwriting blind.

Vacancy history. How many days was each unit empty in the last 12–24 months? Concessions? Move-in specials? Late fees written off? Actual collected rent is what funds your mortgage. Not the number on the listing.

Run your NOI with real numbers. If you can't get them, build in a 15–20% haircut on income. And if the deal still pencils after that haircut, maybe it's worth pursuing. If not, walk. I've walked on two fourplexes in the last year because the seller wouldn't provide actual rent rolls. Both sold to someone else. I don't regret it. The Deal Analysis guide walks through the full underwriting — cap rate, 1% rule, cash flow. Use actuals. Not pro forma.

The 27-Point Physical Checklist

Roof. Age? Number of layers? Most multifamily roofs are 2–4x the cost of a single-family roof. If it's over 15 years old, get a roofer quote. A $12,000 repair on a fourplex can wipe out six months of cash flow.

Sewer. Scope it. Every time. $250–500. I paid $450 on a Cleveland triplex. The scope showed the main line 60% collapsed. Replacement cost: $18,000. I walked. The next buyer didn't scope. They found out at closing. Or after. I don't know. I don't know. I don't care. I kept my money.

HVAC. One system per unit or shared? Age? Last service? Capacity? A fourplex with four 15-year-old units means four replacements in the next 5 years. Budget $4,000–8,000 per unit depending on market. That's $16,000–32,000. Add it to your underwriting.

Electrical. 100-amp or 200-amp panel? Aluminum wiring? Knob-and-tube? Insurance companies hate knob-and-tube. Some won't write a policy. Fix it before you close or factor the cost into your offer.

Foundation. Cracks, settling, water intrusion. Multifamily buildings carry more load. Foundation issues scale with unit count. Get a structural engineer if the home inspector flags anything.

Plumbing. Galvanized pipes? Polybutylene? Lead? Galvanized fails from the inside out. You won't see it until it bursts. Polybutylene was used in the 80s and 90s — it's a ticking time bomb. Replace it.

Lead paint. Pre-1978? Disclosure required. Remediation can run $5,000–15,000 per unit. If you're planning to renovate, you'll disturb it. Plan accordingly.

Appliances. Age, condition, replacement cost. Stove, fridge, water heater per unit. A fourplex with four water heaters at end-of-life is four $1,200 replacements. $4,800. Pencil it in.

Common areas. Hallways, laundry, exterior. Who maintains? If it's you, budget for it. If it's the tenants, make sure the leases say so.

Title and zoning. Liens, judgments, easements — the title company will find them. Zoning: is multifamily legal? Some neighborhoods restrict short-term rentals. If you're buying for STR, confirm before you close.

Lease review. Existing tenants? Read every lease. Deposit amounts, move-in dates, pet policies, renewal terms. A tenant with 18 months left at $200 below market is a drag on NOI. Factor it in.

That's the core. The full 27 points live in the Small Multifamily Investing guide. Roof, sewer, HVAC, electrical, foundation, plumbing, lead paint, appliances, common areas — plus title, zoning, lease review, and a few more. Print it. Use it.

Contingencies You Never Waive

Inspection contingency. Non-negotiable. On multifamily, the risk-to-savings ratio is always wrong. You might lose the deal in a hot market. Fine. Losing the deal beats buying a property with a collapsed sewer and no way out.

Financing contingency. Protects you if the appraisal comes in low. The lender orders it. You don't control the number. If it comes in $20,000 under your offer, you renegotiate or walk. Without a financing contingency, you're stuck.

Earnest money — 1–3% typical. You put it down to show you're serious. If you invoke your inspection contingency and walk, you get it back. If you waive contingencies and something blows up, you might lose it. But losing $3,000 in earnest money beats losing $23,000 in surprise repairs. I've done both. The second one hurts less.

Contingencies protect you. Use them.

Run the Numbers With Real Data

Once you've got actual rent rolls and utility bills, run the full underwriting. NOI = effective gross income minus operating expenses. Cap rate = NOI / purchase price. The 1% rule — monthly rent at least 1% of price — is a quick screen. If it doesn't pass, dig deeper before you fall in love.

The appraisal will come from the lender. They're protecting their collateral. If the property doesn't appraise, the loan falls through or you bring more cash. Know your max. Know your walk-away. The ARV — after-repair value — matters more for flips and BRRRR. For buy-and-hold multifamily, it's NOI and cap rate that drive the decision.

The Deal Analysis guide has the full framework. Six metrics. Worked examples. Use it.

What I Do Now

27 points. Every deal. Rent rolls, utility bills, sewer scope, roof quote if it's old, HVAC age, electrical panel, foundation, plumbing, lead paint, appliances. Contingencies in place. Numbers run with actuals.

That Memphis fourplex cost me $23,000. The Cleveland triplex would have cost me $18,000. I spent $450 on a scope and walked. Best $450 I ever spent.

If you're looking at duplexes, triplexes, or fourplexes, start with the Small Multifamily Investing guide. Compare unit counts — duplex vs quad — and know where the financing threshold sits: commercial vs residential 2–4 units. Then run the checklist. Every time. No shortcuts.