The Due Diligence Process Plan Handbook For Commercial Real Estate Investments
- Publish Date: 2012-09-18
- Binding: Paperback
- Author: Mr. Brian Hennessey
There's a huge problem in the commercial real estate business that nobody is talking about- DUE DILIGENCE. The vast majority of investors, real estate brokers and commercial real estate professionals barely scratch the surface conducting their due diligence when purchasing commercial real estate investments. Investors are taking unnecessary risks and throwing money away or making bad investments,by not properly performing due diligence. Brokers are putting themselves at risk for potential litigation and missing an opportunity to help their clients as a true ally by learning these principles.
Having and adhering to a proven system keeps you from missing something and allows you to do it faster, easier andmore efficiently.
I've been in the commercial real estate industry for over30 years and didn't know what I didn't know until I became an acquisition person for an investor and his investors. Some of these lessons were expensive, embarrassing and quite frankly, gut-wrenching. Many times I vowed never again will I let that happen to me .
Some of the things you will learn:
* What to negotiate in the purchase and sale agreement so that you can maximize the opportunities for yourself when it comes time to negotiate further with the seller
* How to properly review leases so that you know what to look for that could be cause for concern
* How to choose a lender or mortgage broker
* Third party reports, such as Environmental; Property Condition Assessment; Seismic/PML; Geologic and other reports that a lender may require and what to look for in them
* Tips on how to negotiate loan terms and specific provisions in them so you can avoid getting burned later
* Conducting tenant interviews and what questions to ask them so that you can uncover any problems or issues that you would otherwise not be made aware of (Super Powerful. Must learn or you'll miss out.)
* Cost cutting tips and strategies that will help you add value to the property once you own it
* What to look for when reviewing books and records and what to ask the seller for
* One of the most critical processes done during the due diligence process is the underwriting and financial analysis, which is constantly being revised during that process. In the book there is a list of questions that must be addressed and answered while adjusting your financial analysis of the investment and will help you to more accurately assess the potential of how the numbers should work
* How to deal with the appraiser and appraisal process to be more proactive and enhance the potential for the highest possible loan amount
* How to ensure that you are getting everything you deserve when finalizing the transaction and what to look for on the closing statement that may be added by the seller or lender as a credit to them, that you can get eliminated or at least negotiated down by being aware of what to look for
In addition, you get at the end of the book:
* A Sample Lease Abstract Form (which shows you how to fill in all the salient deal points and provisions of a lease document)
* Due Diligence Checklist (an essentiallist of most all items of which you should ask a seller for when negotiating a purchase)
* Due Diligence Document Checklist (an essentiallist of most all of the documents you should request from a seller when negotiating a purchase)
* Sample Tenant Questionnaire (a sample list of questions that you should ask of tenants when conducting a tenant interview)
The fundamentals remain the same when it comes to due diligence for any of the commercial real estate genres, whether it be office or industrial properties; retail or multi-family residential. It is all relevant as well as applicable, and this information can be used to purchase any of them. It will pay for itself many, many times over. I still use it as a reference tool whenever I'm involved with due diligence. We need reminding as much as we need learning. There's just too many things to remember.