🔍 The Due Diligence Period
Your offer was accepted—congratulations! But the deal isn't done. The due diligence period (typically 10-14 days) is your chance to verify everything before you're committed.
Never skip due diligence. Even if you plan to renovate extensively, you need to know what you're buying. Undiscovered foundation issues, mold, or structural problems can turn a great deal into a money pit.
🏗️ The Coliving Inspection Checklist
A coliving property inspection goes beyond a typical home inspection. You're also evaluating the property's potential for room rentals.
Structural & Systems
| Item | What to Check | Deal Killer? |
|---|---|---|
| Foundation | Cracks, settling, moisture intrusion | 🔴 Yes |
| Roof | Age, condition, leaks, remaining life | 🟡 Negotiate |
| HVAC | Age, condition, capacity for full house | 🟡 Negotiate |
| Plumbing | Pipe material, water pressure, drain flow | 🟡 Depends |
| Electrical | Panel size (200A preferred), wiring type | 🟡 Negotiate |
| Water Heater | Size (50+ gal or tankless for coliving) | 🟢 Budget it |
Coliving-Specific Checks
| Item | What to Check | Why It Matters |
|---|---|---|
| Room Sizes | Each bedroom ≥ 70 sq ft (check local code) | Must meet minimum habitable room size |
| Bathroom Ratio | Ideal: 1 bath per 2-3 rooms | More bathrooms = higher rents |
| Parking | Spaces available vs. rooms to rent | Tenants need parking |
| Kitchen Size | Counter space, storage for multiple tenants | Shared kitchen must be functional |
| Egress Windows | Every bedroom needs code-compliant window | Required for legal bedrooms |
| Lockable Doors | Can each room have a keyed lock? | Essential for tenant privacy/security |
| Common Areas | Living room, laundry space | Shared spaces improve experience |
🚩 Red Flags & Deal Killers
🔴 Walk Away
- Major foundation issues ($20K+ to fix)
- Active mold throughout the house
- Zoning prohibits room rentals
- HOA bans rentals or coliving
- Environmental contamination
- Title issues that can't be resolved
- Structural damage requiring engineering
🟡 Negotiate
- Roof needs replacement (ask for credit)
- HVAC is old but functional
- Electrical panel needs upgrade
- Cosmetic issues (great for investors!)
- Minor plumbing issues
- Outdated kitchen/bathrooms
- Needs new water heater
Inspection findings give you leverage to renegotiate. Ask for price reductions or seller credits equal to the cost of needed repairs. Get contractor estimates to support your requests.
📋 Additional Due Diligence
Legal & Regulatory
- Zoning verification: Confirm room rentals are permitted
- Business license: Check if required for room rentals
- Building permits: Verify any past renovations were permitted
- Code compliance: Smoke detectors, carbon monoxide, fire extinguishers
- Insurance: Get landlord policy quotes (mention room-by-room rental)
Financial Verification
- Property taxes: Verify current amount and any pending reassessment
- Utility costs: Request seller's utility bills (12 months)
- Insurance quotes: Get 3 quotes for landlord/rental dwelling policy
- Renovation bids: Get 2-3 contractor estimates
Title Review
- Clean title: No liens, judgments, or encumbrances
- Survey: Property boundaries match description
- Easements: Check for utility or access easements
- Title insurance: Owner's policy recommended
🏛️ Entity Structure
Most coliving investors hold properties in an LLC for liability protection and tax flexibility.
Single-Member LLC
- Simple to set up ($50-500)
- Pass-through taxation
- Asset protection
- Can get DSCR loans in LLC name
Series LLC (Where Available)
- Multiple "series" under one LLC
- Each property isolated
- Lower ongoing costs
- Available in some states
Entity structure has legal and tax implications. Work with a real estate attorney and CPA who specialize in investment properties to choose the right structure for your situation.
🔑 The Closing Process
Timeline: Contract to Keys
Days 1-3: Contract Execution
Sign purchase agreement, deliver earnest money, notify lender.
Days 3-10: Due Diligence
Home inspection, contractor walk-throughs, zoning verification, insurance quotes.
Days 10-14: Negotiate Repairs
Submit repair requests or negotiate credits based on inspection findings.
Days 14-25: Loan Processing
Appraisal ordered, underwriting review, title search completed.
Days 25-28: Clear to Close
Final loan approval, review closing disclosure, wire funds.
Day 30: Closing Day!
Sign documents, transfer funds, receive keys. You're a coliving owner!
✅ Action Steps
- Bookmark the Due Diligence Checklist for your next deal
- Find a home inspector experienced with investment properties
- Get contractor contacts for renovation estimates
- Consult an attorney about LLC formation
- Review your insurance needs for coliving
📌 Key Takeaways
- Never skip due diligence—it's your protection against bad deals
- Coliving inspections check standard items PLUS room-rental-specific factors
- Use inspection findings to negotiate better terms or walk away
- Verify zoning and legality before committing
- Hold properties in an LLC for liability protection