All Forum Posts by: Percy N.

@Brian Plajer for larger multi-family, I recommend:

1. Do a physical lease audit where you review each lease document and cross-reference it with the rent toll.

2. As for a bank ledger or bank deposit report (most software packages like Realpage, Yardi and Resman will have these as standard reports). You could ask for bank statements to verify deposits, but I find some sellers are a little leary for that.

3. Ask for a "delinquency and pre-paid" report showing all the amounts owed and paid in advance.

4. If you have any folks on a housing benefits program, I would get an understanding of that as well.

Verifying the rent roll is an important step but just one of many steps in the DD process. If you message me your email address, I can send you a due diligence template we use.

@Stephen Torti for commercial RE, try to figure out the Cap Rate as that metric is more common.

@Doug Spence what benefits do you see in investing as a multi-member LLC vs as individuals?

The benefits I see are outweighed by the potential downsides and extra admin overhead.

@Dan Cardone, what you mention is possible, whether it is the best scenario for you or not is a discussion with your financial advisor.

Do you have non-recourse debt on the properties? That may have to change or be retitled. 

From what I understand, your solo-k plan can be written to have a Roth component as well.

Lastly, I see you are not too far from us, in case you want to connect over coffee one day.

@Pedro Cardoso, in order to do an apples-to-apples comparison, I would ask the PMs to break down their fees for leasing, renewals, maintenance, etc. 

There may also be other "shared costs" they pass on like IT, marketing, etc.

@DongHui Patel that will vary greatly based on the property size, vintage and local market.

For certain markets, you can buy data (from Axiometrics, etc) that shows the average expenses by property size and vintage.

You can also ask the local PM companies you plan to engage.

What size property is this?

@Justin Martin you would really need someone who is not just experienced but has experience in dealing with your local building inspectors and permiting office to see what is expected from them.

Based on the potential things you have listed, that would be almost like a complete rebuild (sometimes more), so unless you are buying the property for the price of the land, I would be careful.

Net worth and liquidity requirements will vary if it is an agency loan vs a bridge loan and the lender.

I would break the "DD walk-through" into 2 parts:

1. Physical condition - Roofs, interiors, plumbing, electric, HVAC, concrete, landscaping, etc. Walk every unit and take pictures of items that need attention. If logged using some software or even a spreadsheet this information can be very valuable to plan the renovations needed for each unit. Make a note of units with pets. Look for any government-issued violations. Are the common areas and amenities in good shape (pool, laundry, etc)? 

2. Admin review - lease audit (do the actual lease documents match the rent roll). Also, make sure you understand the delinquency at the property. 

The information collected at this stage will feed into your takeover plan and renovation plan.

In large markets, the challenge is getting the attention of a property manager for smaller properties (less than 100 - 200 units). It is also difficult to justify full-time leasing and maintenance people on the payroll.