Purchasing an Apartment Complex? Deal Points To Address.

The best time to discuss big picture items is in the Letter of Intent ("LOI"), but in order to address big picture items, you need to know what they are, below is a small list of items worth mentioning in your LOI.

• Purchase Price (I have a feeling you know to include this...)
• Deposit(s) and how many days after executing the contract you plan on delivering this to the Seller (I say anywhere from 1-3 business days after executing the Contract- sometimes people have issues getting a wire initiated or getting all of their funds in one place).
• Cable/Laundry Contracts. Often these contracts cannot be terminated when you are purchasing the property; however you request that the Seller prorate any bulk payments made by the service provider over the term of that specific contracts life. For example: if the cable contract is going to last for 10 years and the cable provider paid the Seller a bulk payment of $100,000.00 and you buy the property in year one of the cable agreement, then you rightfully deserve $90,000.00, since you are being forced to assume such contract.
• Service Contracts. Do you plan on assuming all of the Seller's service contracts? Do you run your operations where you would like to terminate all service contracts, so this is a place where you can potentially save money (might be worth addressing on the front end - and may help you assess how much income is to be gained as well.
• Assign-ability of the Contract. Make sure you let the Seller know that you will be assigning this contract to an SPE, and you would like to do so without their consent (it is a small issue, and reasonable Sellers will not give a you a hard time - but every so often you get a real jerk).  
• Who is paying for what? Are you leaving what costs you will pay up to the custom of the state in which the property is located in - or are you going to negotiate this? For example, in Missouri, its typical for SELLER to pay for title and in Georgia it is typical for BUYER to pay for title, however in each state you can negotiate otherwise. A big hidden cost is usually TRANSFER TAX. I would do a quick Google search to determine that the Transfer Tax rate is in the state you are purchasing the property. This is real money that people sometimes forget to factor in.

In my next article, I will address deal points that are not that big of deal and that you should use as "leverage" in order to trade for other deal points.