It's a wild time!
We spent the weekend in Lake Placid with family to see the ECAC Hockey Tournament at the newly Historic Olympic Center.
I’ve also been enjoying the NCAA Basketball tournament which never disappoints.
The highlight of the weekend was getting 8 inches of snow Friday night into Saturday. This created the opportunity to build a sled jump in the woods with my brother-in law Steve, our 13 year old nephew Leo and his 2 friends.
Special thanks to our brother Mike and his wife Janet for opening their doors for us at their beautiful house.
It was a Wild Weekend!
NOW, back to business……
Once we are fortunate enough to get a great Real Estate deal under contract, it is approved by our Attorney and then it pushes forward to the Due Diligence period.
WE DO NOT WANT A WILD TIME OPERATING OUR NEXT DEAL!
Proper Due Diligence allows us to verify the deal is worth pursuing. The Due Diligence will create more clarity and allows us to finish the business plan for the property.
Due Diligence consists of 3 components:
1. Financial
2. Physical
3. Legal
The Legal DD begins with our trusted attorney and the process is expedited according to time deadlines for inspections and other issues that may arise.
The Financial Due Diligence verifies the financials that were represented by the seller. The financials include the Profit and Loss statements for the past year or two depending on the property.
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The leases are cross examined with the rent roll for accuracy and a delinquency report is reviewed.
The expense items on the Profit and loss are also reviewed by comparing each expense to the supporting documentation provided by the seller.
The Physical Due Diligence consists of the property inspection, appraisal, survey and environmental inspections.
The legal Due diligence begins with the Attorney Approval, and continues after the Financial and Physical DD. The remainder of the legal DD is ensuring the survey of the property is in order, and completing the title work for the property.
It’s important to perform the DD in this order. You do not want to spend a lot of $ on inspections, and appraisals if the contract falls through after step 1!
There are other details to this process depending on the transaction, but this is an overview of the process.
Our last deal failed during Step 1.
Reach out to me s we can partner on the next Big deal!
Regards,
Bill
REAL ESTATE LINGO:
Profit and loss – Rents minus expenses = Net operating income. The P&L consists of the income and each expense associated with the property.
Survey – The meets and bounds of a property laid out on a formal Survey map
Appraisal – Opinion of value based on a financial evaluation of a property. (A residential appraisal is performed using sales comps)
Environmental – This is based primarily on a property’s former use. An apartment building built on a former landfill will raise questions for an environmental inspection