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Due Diligence ChecklistsLet’s look at due diligence as a process and as a flow of getting tasks done.Splitting it up into three categories will make it a lot easier to follow and keeptrack of. The three categories are: PHYSICAL, FINANCIAL, and LEGAL. A checklistfor each category has been developed.Physical due diligence – this involves physically stepping onto the grounds andinterior of the property. Much like a home inspection, you’ll be checking theintegrity of the exterior, interior, structure, electrical, plumbing, and heating.You’ll also be conducting a rent survey for marketing purposes.Financial due diligence – you’ll verify all of the financials that were given, shown,and shared with you. This includes all income and expenses data, taxes, etc.Legal due diligence – the property’s title, survey, any 3rd party reports, zoning,code compliance, warranties, etc. will be thoroughly examined.How to use the checklist: under each category, check off and verify each line item asit pertains to your deal.Copyright Peter Harris Commercial Property Advisors, Inc 2015
Due diligence checklists – Physical, Financial, LegalPre-Physical due diligence checklistProperty: By: Date:First impressionExteriorsStructureDecorNo. of bldgs.Total sqftg.No. of unitsRoofsSecurityWaste removalFire preventionFloor plansLast renovationAppliance packageFloor coveringsAge of improvementsHallwaysMailboxesLight fixturesDecorationsHVAC ap accessTraffic count (cars)Window treatmentsLandscapingParking lotParking availabilityLightingSignageLeasing officeModelsPercent occupiedRental ratesNeighborhoodStreet accessCopyright Peter Harris Commercial Property Advisors, Inc 2015
Physical due diligence checklistTaskDue Date CompletedGet As–Built plans and specificationsGet property conditions report: soils,environmental, structural, if anySchedule/Review Physical InspectionReportGet previous appraisals, if anySchedule/Review Termite Inspection – ifneededReview Property Management ContractPolice Reports/Reputation of PropertyGo to ApartmentRatings.com andApartmentReviews.net to check uponwhat dissatisfied tenants are sayingabout the property and mgmt.Interview Property ManagementCompanyObtain Capital Improvements Historyfor past 5 years as well as capitalimprovements potentially neededInventory Personal Property (furniture,office equipment, tools, etc.) to be leftbehind for your useApartments Rent/Spaces Available?* How many turnable?* How many “down”?Any Outstanding Building Constructionor Unfinished Projects?Obtain 3 Contactor Rehab Quotes – ifneededObtain Sales CompsCopyright Peter Harris Commercial Property Advisors, Inc 2015Notes
Perform Market Rent SurveyAerial photographsHire Plumber for Plumbing ScopeIs it zoned properly and used properly?Contact Chamber of Commerce findEconomic Dev. Dept Research jobgrowth data and future city plans.Copyright Peter Harris Commercial Property Advisors, Inc 2015
The second component of physical due diligence is to perform a marketcomparison survey of competing properties. This will give you evidence tosupport your hopes of a rent increase or not. Compare the info gathered to your(subject) property.Property Comparable TableProperty: By: Date:Subject PropertyPropertyUnit/spacesqftg.Current rentConcessions?ItemDescriptionLocationAge & iesCarpetingAppliancesWindowsStorageUtilities –paidMgmt Co NameRent/sqftComparable #1Comparable #2Comparable #3DescriptionDescriptionDescriptionDiscuss with Peter – the marketing plan currently implemented (if there is one).Make notes here:A. What do you have that the competition does not have?B. What does the competition have that you don’t?C. Are you outperforming or underperforming in the market (rent, curb appeals, etc.)?Copyright Peter Harris Commercial Property Advisors, Inc 2015
Financial due diligence checklistItemDescriptionCurrent Rent RollCollections of rent –a. delinquency report 30, 60, 90 days past dueb. prepaid reportAccounts receivable report – for past 24 monthsAccounts payable report – for past 24 monthsProperty Income & Expense Reports for last 3 years, ifavailableOwner/property tax returns for last 3 yearsDoes owner have current operating budget?Work with PM company on creating annual operatingbudget (projections)Create rehab budget from bidsYear-to-Date Real Estate Tax Bill for current and prioryearReview All Leases and Addendums and Check: expirationdates, security deposits, all leases are signed, how manyexpire in same month, security deposit on fileContact utility companies for actual expensesList of all lease concessions and incentivesGet Financial Approval from Lender within ContingencyDatesCopyright Peter Harris Commercial Property Advisors, Inc 2015
Legal due diligenceMy first concern with doing this part of due diligence is making sure there are no liens fromcontractors, subcontractors, workers, or material suppliers. This can hold up the deal fromclosing. Also, give extra scrutiny to building code violations and zoning/use infractions.Legal due diligence checklistItemDescriptionGet copy of purchase contract tolender/attorney/title companySend Earnest Money to Title CompanyPreliminary title report reviewSecure title insuranceObtain property surveyEnvironmental compliance – phase 1assessmentCurrent insurance policy: run lossreport for fire/flood/liability claimsReview Service Contracts (laundry,landscape, HVAC, etc)Obtain 3 insurance quotesObtain copies of licenses, permits, &certificates if anyObtain Copies of All SurvivingGuarantees and WarrantiesMatch current zoning with currentuseLocal code complianceGet current staffing report and list ofemployee benefits packagesCopyright Peter Harris Commercial Property Advisors, Inc 2015
NOTESCopyright Peter Harris Commercial Property Advisors, Inc 2015
Legal due diligence My first concern with doing this part of due diligence is making sure there are no liens from contractors, subcontractors, workers, or material suppliers. This can hold up the deal from closing. Also, give extra scrutiny to building code violations and zoning/use infractions. Legal due diligence checklist Item DescriptionFile Size: 408KBPage Count: 8
