In order to make an educated decision when purchasing a property, we created a list of needed material to aid in our due diligence process. In this post, I’ll share 25 points we use as an addendum to every letter of intent (LOI) we submit when starting the buying process.
1. Copies of income and expense statements for the Property covering the previous two calendar years and current year to date, certified true and correct in all material respects (this is a specific lender requirement);
2. Monthly bank delivered or bank prepared statements reports for the past twelve (12) months for all checking and savings accounts that relate to the Property;
3. Copies of bank deposit slips for the past three (3) months;
4. Copy of rent roll – The most recent rent roll and monthly rent rolls for the past twelve (12) months; including names of tenants, rents, security deposit schedule, expenses paid by tenants and by Seller, commencement dates, terms of leases, and all other pertinent data for the Property certified by Seller to be true, correct and complete in all material respects.
5. Copies of all utility bills for the Property for the current billing cycle period and for the past twelve (12) months, and copies of utility or service agreements currently in effect at the Property showing services are currently in effect; (heat, electric, water, sewer, trash cable, phone, others)
6. Copies of all maintenance, management, service, vendors and other contacts relating to the ownership and operation of the property. (Examples)
- Term of contract
- Monthly cost for services
- Work to be performed
- Termination penalty
- Pest Control
- Trash Removal
- Janitorial Service
- Maid Service
- Tax Consulting
- Window Washing
- Parking Lot Sweeping
- Snow Removal
7. List of on-site employees with current salary history and a description of any on-site living arrangements;
8. Copies of all Commercial Leases, currently effective letters of intent with prospective tenants, brokerage commission agreements, and other agreements related to the leasing of the Property, including all modifications, supplements or amendments Seller’s Property Manager;
9. Copies of any written notice of any uncured violations received by Seller from any federal, state, or local governmental authority or agency related to the Property during the past three (3) years;
10. Copy of current Certificate of Occupancy for each of the building(s) on the Property, and copies of all other licenses and building permits required by applicable law to own, operate, manage and maintain the Property;
11. Copy of the most recent City Property Inspection report, if any;
12. Copies of all owned written warranties and guarantees concerning property;
13. Copy of any tenant Delinquency and Prepaid Rent Report(s);
14.Tenant Collections & Vacancy History for the past twelve (12) months.
15. A list of all capital expenditures incurred during the previous two (2) calendar years and the current calendar year-to-date together with the budget for any contemplated in the future if applicable.
16. Copy of the most recent loan payment coupon or statement for the Existing Loan;
17. Copies of all mortgage documents including letter from current lender(s) showing the current balances and terms of the mortgages.
18. Copies of any environmental, pest and termite, structural, mechanical or engineering reports in Seller’s possession prepared by third parties with respect to the property.
19. Legal Description of Property. Blueprints and specifications of property (site plans and survey).
20. As-Built plans and specification showing any improvements to the property.
21. Copies of tenant leases and tenant files for review (at Purchaser’s expense) at the office of Seller’s Property Manager.
22. Copies of insurance certificates for all fire, hazard, liability, and other insurance policies maintained by Seller for the Property; and Insurance Loss Runs for the past five (5) years and year-to-date.
23. Copies of last two years.’ tax bills and copies of any notice of change in assessed value or tax rate for the Property as well as information regarding the progress of any ongoing real property and personal property tax protests concerning the Property;
24. Copies of all permitted encumbrances on the property; Liens or liabilities on
the property that should be known to the purchaser prior to closing.
25. A complete list, tally and description of all inventory to be transferred with the property. (Example list)
- Office and office equipment (including all serial numbers)
- Appliances (including all serial numbers)
- Mechanical (including all serial numbers)
- Maintenance equipment
- Pool (if applicable)
- Tennis Court (if applicable)
- General Contractor