out of state investing in Detroit

[Andy Li]

I have a commercial retail property in NJ and thus am familiar with it here. However is there anything significantly different in Michigan? Also, the sellers agent will not give me copies of the lease until after an approved purchase agreement. Is this normal for Mi?

[Joel Owens]

Hi Andy,

For retail this is how I usually structure transactions for my clients.

I review hundreds to thousands of flyers and OM's nationally each week. I like about 15 to 20% of properties I see. Once I see something I like I share with my client and if they are interested I then do a non-binding LOI to the owner or listing broker ( if it's listed). The LOI has a confidentiality component to it. In the (initial review period of the LOI about 14 days) I look at leases and other items within about a week or less period. I am looking quickly for any major problems that would affect my buyers income expectations with the property or financing issues based on language of the leases.

If there do not appear to be any then the commercial retail attorney is engaged to negotiate the purchase and sale agreement which can take 1 to 2 weeks. After PSA is signed then lender deposit is sent in and reports are ordered (environmental, site inspection, survey, appraisal,etc.) during due diligence period in the PSA ( we typically do 45 day close and the first 30 days of that are due diligence). Within 30 days you can generally get all reports back and work through all seller due diligence material items and receive a loan commitment from the lender and a rate lock.

The LOI part is so that my buyers hopefully limit upfront money spent and do not jump into deal after deal spending thousands to tens of thousands with an attorney negotiating PSA's and ordering reports to not close on a property.

This is even more important with 1031 exchange buyers as you do not want to set a selection only to find out a massive problem and you now just have 2 choices left as all 3 choices are locked in after the 45 day ID period. When you lock in a choice you want to know it is solid.