Due Diligence...what’s next?

[Shaun Draughn]

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!

[Henri Meli]

@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 !!!