Due Diligence Checklist ?

Question

This Friday my wife and I are going to be taking a trip to look at a property that consists of approximately one acre of land located in Maine. It includes a 3-bedroom, 1-bathroom ranch house along with a private street hosting a small mobile home park with 5 units of which are owned by the seller.

As this is a all new to us I am trying to put together a Due Diligence Checklist to take with me on the trip. I'm hoping to get suggestions from some of experienced people here.

I welcome any tips and/or suggestions as well!

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Doug Smith · Answer

I'll cut and paste what we send out for the initial approval for a loan on multi-family, but it's similar to what we ask for for a MH Park. I hope it helps:

Items Needed To Submit Your Loan To Processing

• Guarantor Application: Complete one application for each Guarantor. Fill in all boxes the best you can. Each owner of the entity with a 20% or more interest must complete this application, but you can do it separately. We do not share information with the other partners.
• Personal Financial Statement If you already have a form with all of this information, that’s great. We can use that, but I need one for each and every guarantor.
• HUD or Sales Contract: For a refinance please provide the HUD from when the property was purchased. For purchases please providefully-executed sales contract complete with all addendums. If you are getting the property from a wholesaler or other assignor, we need a complete, fully-executed copy of the assignment as well.
• 3 Months Asset Statements: Please provide 2 months bank & brokerage statements, all pages (even if they are blank).
• Survey: The title agent will need a copy of the survey. If you have one, great. If not, we’ll need to have one ordered for you.
• Entity Documents (NEEDED FOR PREAPPROVAL):LLC/LLP
• LLC/LLP

• LLC/LLP

i.Copy of Articles of Formation/Incorporation

ii.Copy of fully executed Operating Agreement/Partnership Agreement (all pages & amendments)

iii.Certificate of Foreign Qualification (if applicable)

• Corporation

i.Copy of Articles of Formation/Incorporation

ii.Copy of fully executed Corporate Resolution designating authorized signer(s) for the Corporation

iii.Copy of fully executed Corporate Bylaws

iv.Copy of stock certification

v.Certificate of Foreign Qualification (if applicable)

• Identification (NEEDED FOR PREAPPROVAL): Copy Driver’s License or Passport for each Guarantor.
• Rent Roll (NEEDED FOR PREAPPROVAL): We’ll need to get an understanding of the current cash flow of the property. Part of that is to get a rent roll showing current rents, square footage of unit, expiration of the lease, and the current status of the tenant payments.
• Profit/Loss Statement and Balance Sheet for the Property: At a minimum, we would want a profit/loss statement and a balance sheet for the most recent complete year as well as year-to-date for the property, but we would prefer to also get the last 2 years of tax return pages for the property.
• Experience – (NEEDED FOR PREAPPROVAL): A big portion of how aggressive we can be with our terms is your experience. We need to show underwriting what your experience level looks like. Please provide us with a list of properties that you have flipped in the past including dates, addresses, amounts, outcomes, etc. Please provide us with no more than the last 8 Settlement Statements from your past transactions.
• Insurance Information: We will need a copy of the binder or declarations page for the property hazard insurance and, if applicable, the flood insurance. Be sure to get us the name, phone number, and email address for your agent(s). Also, for properties of 5 units or more, we need to get a copy of your general commercial liability declarations page.