Due Diligence...what’s next?

7 Replies

Hello all, question for those of you who are buying multifamily properties! What are some of the biggest fees you incur during the due diligence period? Besides attorney fees, appraisal. I am just trying to understand better how much more in addition to the down payment should you expect to pay! And what type of “consultant” assessments are ABSOLUTELY recommended be apart of the due diligence process? I am reading “The Due Diligence Handbook For Commercial Real Estate” by Brian Hennessey and there are some good helpful tips thus far but I’m not seeing any specific detail about fees for these steps. Would love to hear from those who are experienced in acquisitions or anyone who has been through the process! Thanks in advance!

@Shaun Draughn commercial is probably different then residential, but I’d get a rent roll, and expenses break down (with documentation), environmental survey, inspection, including plumbing, etc

@Shaun Draughn The fees associated with buying a commercial property will include but not limited to: attorney, appraisal, title, property inspection, lead paint inspection, structural fees, survey, recording, other bank fees. 

@Shaun Draughn I haven’t yet as I haven’t even lived here a year yet.  If I stay here long term (gonna be 2-3 years before I know that or not), then I eventually would.  

Right now it’s all long distance.  You may want to talk with @Henri Meli some about small apartments or commercial buildings.  I believe he’s been looking recently for small apartments in the triangle or within a couple hours of here 

oh wow welcome to the area!!  I am down the street from you in Apex, and I am also looking to invest in other markets! @Henri Meli would love to chat with you about your strategy or things you have going on. I see we are already connected but don't think Ive formally introduced myself. 

@Shaun Draughn . I'm currently not buying Multi families in the triangle. I have purchased commercial office building and the due diligence checklist was quite extensive.

Are you only looking for things that cost money right away? If so, PCA (Property Condition Assessment), Phase1 Environmental, Survey, Appraisal will cost you money. But there is plenty ... Fees to Set up an LLC

Get Insurance quote. (free)

Get T12, Rent roll (free)

Get actual lease contracts (Free)

Are there delinquencies on the property? (Free)

Are there Pending litigations? (Free)

What are the HOA / Covenant rules? What exactly are you on the hook for?

Anything major to fix? Did you get contractor quotes?

How old is the property? Lead Paint might be needed.

Are you doing 1031 - Exchange? There are some fees there.

Structural

Recording fees

Title fees

Bank fees (origination)

Attorney closing fees

Following the closing: Utility switching cost deposit money.

Are you managing yourself? Do you have a PM? 

If this is your first jump, make sure you get a good checklist and go line by line ... and check with your Real Estate Agent/Banker/Attorney ... etc. Tell them to spell it out for you. All of them.

These things add up ... like crazy. If you don't have a buffer, ... you might go crazy before you know it.

Good Luck !!!

@Henri Meli thanks for the run down, I knew the list would be extensive but this is pretty detailed I appreciate that. Also I know there are items to outsource and have a professional pour over and some things I can do on my own and am steady attempting to differentiate the two as well as figure out what other items will cost you up front. My partner and I went through the process of getting land developed to do a townhouse development and quickly realized this wasn't in our field of expertise. Which is another reason I wanted to seek help on the process of due diligence because we wasted money on the site plans, soil test, geo tech etc. and the deal didn't go through.