Due Diligence List ?

Question

Hi,

I'm looking invest in a few apartment buildings. What should be on my due diligence list ? When someone here acquires a property whats on there due diligence list ? Thanks.

Steve

N/A N/A · Answer

Hi,

Would this be a good list ?

Annual profit and loss statements (P&Ls) past 3 years minimum (5 years preferred)

At least one year monthly P&Ls (preferably two years)

Balance sheet (3 years)

Rent Roll including term, deposit, and payment history

Tax returns- 3 years

Insurance: Insurance Policy; including all riders, risk assessments, and disclosure affidavit for carrier

All Existing Loan Documents: including notes, deeds of trust, closing statements, title policy, rate riders, etc., and contact names and numbers.

Deed

All Leases: entire copies plus any addendum or riders.

Any service or advertising contracts: (Trash, extermination, maintenance, management, commission agreements, union agreements, vending, billboard, pay telephone, etc. and any instrument or contract to be assumed by Purchaser)

Copies of all recent appraisals, engineering reports, environmental reports

Survey (as-built), legal description, architectural and engineering plans and specifications

Payroll register: List of employees including name, position, wage rate, and entitled benefits

Business license

Physical inventory of furniture, fixtures, and equipment, and supplies.

Utility bills: Water, Sewer, Gas, Electric (at least two years of monthly statements) (or recap report from provider showing usage and cost)

Bank statements showing deposits for last twelve months (optional)

Phone system documents (y2k compliance letters)

Computer systems (y2k compliance letters)

Fire System inspection reports and y2k compliance

Property Tax tickets for the past three years (real estate and personal)

Litigation History: details of any past or pending litigation (if none, then affidavit from owner)

pre-closing

Engineering Inspection and Survey

Environmental Inspection and Survey: Key Issues: Asbestos, Lead Paint, underground tanks, wetlands

Environmental Phase One: An Environmental Phase One (1) Assessment is an inquiry conducted to determine the environmental status of a property or facility in connection with a real estate property transaction. It follows standards which includes those published by ASTM.

Environmental Phase Two: Assessments/Subsurface Investigations: These projects include but are not limited to subsurface drilling and sampling, monitoring well installation and sampling, ground penetrating radar, and asbestos and lead sampling.

LUST survey- leaking underground storage tanks

Financial Audit

Title Search and policy

Property tax verification

Tenant Estoppel Letters

Mortgagee Estoppel letters

Legal Verifications: licenses, permits, zoning

Ken Hicks · Answer

I am also interested in a list. For example a list to check out the usage of water, pass heating bills est. I know there is lots to check out about apartment buildings and the smallest mistake could lead you to the pits fast. I Called about a building that have 8 units and the realtor told me the NOI then i asked if the lawn work moweing, snowremovel garbage was encluded in the NOI the realtor blow me off saying a true investor will find a way to make money. If i had said "man i'll take it" i bet i would be spending 1,000 a month just to have the building. On the other side even single family homes can be complexed at times if you don't have a list for checking past heat bills, garbage, and what ever else you can dig up. even filling a vacancy is hard if you don't have a list and stick to it. changing the utilities over can cost you around 30 bucks if you don't have a plan for a new tenant. I don't have a list but sure would like one.

Joshua Dorkin · Answer

Steve, want to elaborate a bit here for everyone?