How long should due diligence period be?

6 Replies

When contracting for a multi-unit asset how long do you normally ask for a due diligence period?  I realize this may depend on the number of units in each property but if anyone can provide a standard timeline breakdown that would really be appreciated.

7-14 days is "normal" but it would depend on the condition of the subject property, number of units, etc.

@Kimberly M. I bought a 550+ unit deal and my inspection period was 30 days.

Like you said the number of days depends on many factors.

I would suggest that you error on the side of giving yourself more days to properly review the asset before your EMD (earnest money deposit) goes hard (non-refundable).

Originally posted by @Kimberly M. :

When contracting for a multi-unit asset how long do you normally ask for a due diligence period?  I realize this may depend on the number of units in each property but if anyone can provide a standard timeline breakdown that would really be appreciated.

 5-14 days typically.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

@Kimberly M.

Depending on the size, I normally ask for 30 days, starting from when I receive ALL the financial numbers.  3 step due diligence. First is financial, if numbers work, move onto physical (inspection). Don't spend money on inspection if numbers don't work. Continue with legal due diligence while inspection is occurring.

You need at least 30 days to complete the process accurately.    Give yourself as much time to complete before your money goes hard.

Good luck

Gino

Depends on the competition and size of deal. For a 50+ unit, 30 days, 20-50 units, I would say 20 days and less than 20 units, 7-15 days. 

For 50+ units, if it is off market, then I am going to ask for 30 days after receiving all of the financials that I request (Taxes, rent roll, T-12, P&L's for the past 3 years, utility bills, surveys, environmental reports, etc). 

If there is still competition, I may reduce it down to 15 days, if I think that is feasible. 

I try and get as many as I can. 30 is a standard ask. 21 is totally doable. If we're talking 5+ units the issue is the appraisal and loan. I can gets my guys and I through the units in a couple hours and I can rip through the paperwork in a day if it's complete. But hard to rush a bank. In early '16 I got a call from a broker I know and he said he had a 28 unit, had to be this price, had to be today. 175k EMD by wired by tomorrow, 3 day inspections, no loan cont, no appraisal cont. Now keep in my mind I have a lot of experience both doing this and doing in this area. And my banks care about the relationship with me, as does this agent. They came to me cause I can close. But still, a fair amount of risk. That said, probably the best building of that size we have in the portfolio. It is a killer building and that's what it took to get it.

Long story short, know how many days your lender takes and know what you can do if you have to. I've gotten several other calls like that where I coudn't quite do it and two of those I know for sure I missed out on good coin.

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