What To Have Ready When Selling Rental Property?

[Dan Gandee]

One of the biggest problems I see when listing millions of dollars of investment property is that the seller has no proof, track record, cookie crumble trail, or P&L of successful ownership to validate the GRM/CAP/PPUNIT/COCR. And nearly 80% of the time, the MLS or commercial property listing has false, incorrect, or misleading financials. You must dig deeper to figure out what the seller is or has been neglecting to inflate those figures prior to going active with the listing. In doing so, we discover countless issues to cap rate valuation and expense ratios.

I've created our due diligence checklist we provide all of our clients that you are free to make a copy of! (There is probably something missing because this is the marketing version) 

Make sure to ask for the basics prior to writing up an LOI or offer. If they can't provide you this, then you need to hedge risk vs. reward of your time looking further into the property.

1. Current P&L (Trailing 12 at a minimum) But Prefer Last 3 Years 

2. Current Leases In Place 

3. Current Rent Roll 

4. Current File of All Tenant Issues (Delinquencies, Notices, Evictions) 

5. All Utility Bills 

6. All Insurance Statements 

7. Copy of Schedule E (Last 3 Years) 

8. List of All Capital Expenditures Completed In Last 3 Years 

9. Any Litigation Both Pending & New 

10. Copies of All Inspections Completed Last 5 years 

11. Permits & Regulatory Paperwork 

And the list goes on...(Believe me Multifamily Investors...There is much more to ask for so don't freak on me!) 

I can get away with running a simple APOD with just the current rent roll, leases, P&L, and utility statements, so there is some fast tracking you can perform to pencil the deal, but once you do accept an offer i.e. go into contract, make sure to ask for the full gamut of items. 

When I first got started, my commercial broker was lazy and they slacked on providing me Schedule E's which once we did get them noticed they were money laundering cash payments from tenants' rent. LOOK DEEPER PEOPLE! 

If you have any questions - Reach out to me! Happy Investing!