Due Dilligence

1 Reply

Hello Everyone!

I have been looking at some properties lately, and trying to analyze them. I understand that there is a period of due diligence once you get the property under contract, and I was wondering if you guys would help by telling where do you find accurate information about rent rolls, property income, expenses, taxes, etc. 

A few people have told me that sometimes the seller will not give you accurate numbers, as he/she is trying to make the property look like a better deal than what it actually is.

Your help is greatly appreciated!

-Hermilo

Originally posted by @Hermilo Garcia :

Hello Everyone!

I have been looking at some properties lately, and trying to analyze them. I understand that there is a period of due diligence once you get the property under contract, and I was wondering if you guys would help by telling where do you find accurate information about rent rolls, property income, expenses, taxes, etc. 

A few people have told me that sometimes the seller will not give you accurate numbers, as he/she is trying to make the property look like a better deal than what it actually is.

Your help is greatly appreciated!

-Hermilo

Rent: You ask to see copies of the current leases, optionally with some info redacted (but not the address of course). And/or you post fake craigslist ads for tenants, and see what hits you get. And/or you make your realtor EARN HER COMMISSION and prepare rental CMA for you. And/or you do the unthinkable and READ THE APPRAISAL report (if it's not to your liking, invoke the appraisal contingency and back out of the deal).

Expenses: No one's going to be honest about this, you could theoretically ask for schedule E of seller's tax returns. Get tight with a good inspector to help you anticipate (if it's not to your liking, invoke the inspection contingency and back out of the deal). 

Taxes: Any marginally competent lender can teach you how to pull prop tax bill and calculate what your tax bill would be at any given purchase price in like 30 seconds. We're in California and have prop 13, so our prop tax bills don't swing wildly this way and that.