One of the key phrases we all hear, as apartment investors, is when you are investing in apartments บ้าน มือสอง (or other real estate properties) you "lock in your profits on the day you close on the deal". This of course is not completely accurate but it makes the point of once you sign the documents you are committed to this property at whatever price you paid. One of the best ways to prevent those surprises and to continue to be satisfied with your purchase after the closing day is to perform a full and detailed " due diligence inspection " before you make the final commitments.
Many apartments are purchased with the false assumption that the information you are given by the seller or their broker is accurate and complete. Am I saying they are purposely lying to you? Not necessarily. But I am saying every buyer needs to know and remember that the seller is simply not looking out for your best interests. Their packet of selling info could easily miss items (as often does) or miscalculated items (as often does) and it is up to you as the buyer to determine the full and accurate picture.
So, whenever both parties sign a purchase contract the clock starts ticking. The buyer will typically have around 30 - 60 days (after receiving requested info from the seller) to perform his due diligence and inspections which will determine whether the sale will proceed as originally planned or changes are required. But the point is that this is a finite period of time. So, lets talk about what is imperative to include in your due diligence process.
Item 1: Walk it out - you or your inspector need to walk inside every single unit. Many times you are encouraged to simply see every other unit or one unit per building but those are false assumptions. It is vital to walk inside every unit and take notes on condition of flooring, walls, appliances, cabinets, air conditioners, etc. The condition of each unit can change dramatically so do not take the gamble of missing the one unit that was the worst one. Walk all units, take lots of notes and make yourself aware of needed repairs.
Item 2: Talk to everyone - one of the benefits of you participating in the inspection is being able to talk with every tenant you can find. This does not need to be an interrogation but rather some basic questions about their experience at the apartments such as (I) how long have you lived here, (ii) how do you like living here, (iii) have you had any big maintenance issues, (iv) do you have good neighbors... you get the picture. The tenants will tell you lots of things that you will never hear from the sellers.
Item 3: Walk the exterior - the exterior is just as important as the interior. Take a full inspection of the condition of the roof, gutters, exterior walls, landscaping, windows, decks, parking lot, storm drainage, foundation, sewer system, etc. Now I realize many, if not most buyers, will not have the background to know when something is a problem. However, good common sense goes a long way, so you are probably more qualified than you give yourself credit for. If you are paying for a professional inspector then I encourage you to walk with them and ask questions. If you are just reading his report without the benefit of walking the property you cannot get the full flavor of the report.
Item 4: Financials & Documents -
Ask for everything and question everything. This may sound tedious but you really need to check all the details. Get a copy of every lease agreement and make sure it is current and has no special promises. Review the financial reports (if they have them) for the past three years and look for unusual changes. Compare the financials to their tax returns and to their checking account. Do rents received match deposits made? Do expenses paid match checks written? Cross reference as much as you can to get an idea if the financials make sense. Watch out for economic vacancy. If the property has a lease for every unit then they say it has 0% vacancy. But, if some tenants were given 1 months free rent as incentive and some tenants have not been able to pay the full rent then you have "economic vacancy". Be on the lookout for this condition. Verify everything - utility expenses can be confirmed with a request of records from utility companies. Property taxes can be confirmed with city and county records. Your insurance rep can provide a quote for the new policy. The existing insurance company can provide records of previous claim incidents. Independent contractors (e.g. landscaping and pest control) want you to retain them so they will provide their cost info. You get the idea. Capital expenses - when money is spent on the property it can either be charged as a normal operating expense (like fixing a toilet) or put on the balance sheet as a one time Capital expenditure (such as roof replacement). Sometimes, the owner is tempted to put normal expenses on the Capital Expense side which in effect reduces their daily expenses and makes it look like they have made more money. So, request a list of their capital expenditures and make sure they are in the correct category.
This list does not cover it all, but if you follow this checklist you will certainly know on the day of closing what you are buying. Take the time to stay involved in the Due Diligence process and you will be a happy buyer. Have Fun.
ไม่มีความคิดเห็น:
แสดงความคิดเห็น