How Buyers Evaluate a Multi-Family Building

Why due diligence matters when selling a multi-family building

Anyone selling a multi-family building will encounter the term due diligence. It refers to the detailed review of the property by the buyer. For multi-family buildings this review includes not only the structure but also tenant information income data and legal framework. In Berlin additional factors such as conservation areas and district regulations play a role.

Understanding how buyers evaluate a building helps owners prepare effectively and streamline the sales process.

1. Review of documents

The property documents form the foundation of any due diligence. Buyers want to understand the economic and technical condition of the building. For a structured overview of the most important items, see our Document Checklist for Selling a Multi-Family Building in Berlin.

• Tenant list including unit sizes
• Complete rental agreements
• Rental income overview for the past 12 months
• Service charge statements for the past 3 years
• Land registry extract with encumbrances and easements
• Baulastenverzeichnis from the district office
• Energy performance certificate preferably consumption based
• Building permits and renovation records

2. Technical inspection of the building

The technical due diligence focuses on the building’s condition and maintenance history. An overarching view of opportunities, risks, and strategy when selling can be found in our main guide for selling a multi-family building in Berlin without an agent.

• Roof and façade condition age and documented work
• Heating system including maintenance reports
• Electrical systems and risers especially relevant for older buildings
• Basement and moisture issues common in Berlin
• Common areas such as stairwells and courtyards

3. Review of tenant structure

Tenant structure is a central factor in Berlin. Buyers pay close attention to:

• Duration of tenancies and stability
• Rent levels in relation to the Berlin rent index
• Vacancy temporary or long term
• Historical fluctuation

4. Economic review and income stability

The economic due diligence examines the income profile of the property.

• Net annual cold rent (JNKM)
• Operating cost structure
• Financial planning documents if available
• Commercial units with their own sensitivities

5. Conservation areas and district regulations

Many Berlin districts have conservation areas. Buyers therefore verify early whether the property is affected.

• Conservation area status or district confirmation
• Pre-emption right with a review period of up to 2 months
• Restrictions on modernisation

6. Typical due diligence process

The typical process is structured as follows:

• Initial document review
• Viewing of relevant building areas
• Detailed document analysis
• Requests for clarification
• Financing confirmation
• Negotiation and notary preparation

For a more practical view of how these steps play out during on-site meetings and conversations, see our article Viewings and Negotiations When Selling a Multi-Family Building.

Next step

A reliable valuation helps prepare for due diligence and makes the sales process more predictable. Use our digital valuation tool to receive an instant result based on location rental income conservation area status and building characteristics.