Episode 45: Building Your Due Diligence Team

Building Passive Income

00:00 / 00:13:07

Welcome to Building Passive Income with CREI Collin

Due diligence is not a solo process. It requires the right team.

In this episode, CREI Collin is joined by Tax Pro Tina to break down exactly who you need on your real estate due diligence team and why each role matters.

You will learn how a CPA supports your deal, what red flags to watch for in financials and tax returns, how entity structuring impacts your taxes and liability, and why cost segregation can significantly increase your tax savings.

If you want to make confident investment decisions, this episode shows you how to build the right team before you ever go under contract.

In This Episode, You’ll Learn:

• The seven core members of a real estate due diligence team

• What a CPA does during due diligence—and why timing matters

• How to identify discrepancies between rent rolls, operating statements, and tax returns

• Why income should be verified against actual deposits, not reported figures

• Four tax-related red flags that can signal problems with a deal

• How entity structuring impacts taxes, liability protection, and capital raising

• What cost segregation is and how it can increase early-year tax savings

• Why you should build your due diligence team before you need it

• What to look for when hiring an attorney, inspector, and environmental consultant

• When to involve a property manager during due diligence

• The biggest mistake investors make when building their team

Key Topics Covered:

[00:00] Introduction – Welcome Tax Pro Tina

[02:00] The Full Due Diligence Team – Who you need

[02:30] Real Estate Attorney – Contracts, title, legal review

[03:00] Property Inspector – Physical condition and deferred maintenance

[03:30] Environmental Consultant – Phase I and Phase II reports

[04:00] Appraiser – Independent valuation

[04:30] Lender – Financing and underwriting

[05:00] Property Manager – Validating operations and assumptions

[05:30] CPA / Tax Advisor – Tax planning and financial analysis

[06:00] What a CPA Does During Due Diligence

[06:30] Reviewing Financials – Rent rolls vs tax returns

[07:30] Case Study – Income discrepancy example

[08:30] Entity Structuring – LLCs and partnerships

[09:30] Identifying Tax Benefits – Depreciation and strategy

[10:00] Financing Impact – DSCR and scenario modeling

[11:00] When to Bring in a CPA

[12:00] Common Tax Red Flags

[15:30] Why Entity Structuring Matters

[18:00] What Is Cost Segregation

[21:00] Build Your Team Early

[22:00] Hiring the Right Specialists

[26:00] When to Bring in a Property Manager

[27:00] Biggest Mistake Investors Make

[29:00] Recap and Next Episode

Key Takeaways: Real Estate Due Diligence Team

Build the Right Team Early

✅ Your due diligence team should include: attorney, inspector, environmental consultant, appraiser, lender, property manager, and CPA

✅ The quality of your decision depends on the strength of your team

Understand the CPA’s Role

✅ A CPA reviews financials, identifies tax benefits, and evaluates deal structure

✅ Bring your CPA in early—not after closing

Verify Financial Accuracy

✅ Always verify income using actual deposits and tax returns

✅ Do not rely solely on rent rolls or seller-reported numbers

Watch for Red Flags

🚩 Income on tax return does not match rent roll

🚩 Expenses appear unusually low

🚩 Seller has not been depreciating the asset

🚩 Outstanding tax liens or unpaid taxes

Structure Matters

✅ Entity structure impacts taxes, liability, and capital raising

✅ Pass-through structures allow investors to benefit from depreciation

Use Cost Segregation Strategically

✅ Cost segregation accelerates depreciation

✅ Example: A $5M property could generate significantly higher early-year deductions

✅ Studies typically cost $5K to $15K but can produce substantial tax savings

Do Not Cut Corners

❌ Skipping team members to save money increases risk

✅ Due diligence costs should be viewed as risk management

✅ A small upfront cost can uncover major issues before closing

Resources Mentioned:

• Property Condition Assessment (PCA) – Identifies deferred maintenance

• Phase I Environmental Report – Environmental risk screening

• Phase II Environmental Report – Follow-up testing if needed

• Cost Segregation Study – Accelerated depreciation strategy

• 1031 Exchange – Tax deferral strategy

• DSCR (Debt Service Coverage Ratio) – Loan risk metric

• CREI Partners: https://www.creipartners.com/

• Schedule a Call: https://calendly.com/shelbi-creipartners/30min

• Passive Investor Coaching: https://passiveinvestorcoaching.com/

Ready to Build Your Passive Income Portfolio?

Schedule your free 30-minute consultation:
https://calendly.com/shelbi-creipartners/30min

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Disclaimer:

This podcast is for educational purposes only and does not constitute legal, tax, or investment advice. Always consult qualified professionals before making decisions.