First LOI

[Masroor Ahmed]

Hey BP folks - I'm a new investor and need some help getting over the challenge of getting deal number one.

While there's a ton written about due diligence check lists / process, I'd like some advice on pre-LOI diligence and getting comfortable enough to make an offer. How much leg work do you do before putting in an offer? Here are a few things I've hit on, but feeling nervous about putting in an LOI:

- research on surround area, demographics, businesses, general outlook

- walk through of building, saw 2 units of 8 with listing agent. Then drove by a couple times myself

- in the walk through, i evaluated as much as I could about the condition of the bldg, windows, age of appliances, common areas, water damage, etc.

- I'm a finance person, so I've evaluated the heck out of the math and varied scenarios

What am I missing? Adding to my caution, the property has been on the market for 3-4 months and the listing agent told me last week that they haven't seen any offers.  I even casually told him that the math doesn't work for me until i'm at a ~30% discount to current asking price.  Knowing that, he's still asking me to put in what I feel is a fair offer.  It probably doesn't matter, but my thought is he's either asking for an offer so he can claim at least one offer for his client (even if 30% lower than ask) or he really thinks the seller would consider this (I'm probably over thinking this last bit)...

Help =)

[Will Barnard]

Originally posted by @Wayne Brooks:

On an 8 unit building, I wouldn't be using a LOI, but a purchase contract instead. You have the same contingencies and requirements, but generally the LOI is not binding, and the seller can back out at any time.

It is standard practice to submit an LOI on commercial properties rather than a purchase contract. A lot goes into contracts on commercial and it is a waste of legal fees to draft all of that before even knowing if you have a deal or not. That is the entire reason for LOI's and quite frankly, it should be done on residential too (but that is a topic for another day). While the LOI is not legal binding and does not protect you from someone else getting the deal, it puts all your terms in writing to the seller and then they choose the party they feel is bet based on the LOI's they have received. At that point, you go to contract and spend the money on legal.

Back to fear, DO NOT let fear stop you. The rich act in spite of fear while others allow fear to stop them. Do not fall into that trap. The only thing to fear is fear itself!