Either you are purchasing a new property or you are taking over the management of a property, having a strong procedure in place will mitigate the risks associated with this.

Our team of real estate professionals has put together this comprehensive due diligence checklist that will allow for a smooth transition.

This is a list with items that one could request :

1) TENANTS

a) All Leases, Amendments

b) Vacant Spaces

c) Renewals and expirations within 6-12 months (probability of tenants to renew the spaces)

d) Financial Information of the tenants

e) Future obligations of the landlord as stipulated in the leases - such as commissions, TIs, etc.

2) FINANCIALS

a) Rent rolls (to be reviewed in conjunctions with the leases)

b) Income Statements for the past 2-3 years

c) Balance Sheet

d) Operating budgets for the current year + prior 2 years

e) CAM recoveries - most recent calculations and invoices sent to the tenants

f) Property tax bills, utility bills

g) Capital Improvement schedules (with original cost, interest and amortization schedules)

h) Security Deposits of the tenants (verify if what the LL has in its books matches with the leases)

i) Copy of the current AR report

j) Other outstanding obligations of the landlord

k) Estoppel certificates from each tenant

l) Tax assessments

m) Review existing mortgage documents and other restrictive covenants

3) PROPERTY

a) title search and zoning review

b) loan documents

c) floor plans with BOMA surveys (review if the GLA of the units matches with the BOMA surveys)

d) Appraisal report to see the appraised value of the property

e) Property Condition report

f) Environmental reports - min Phase 1 , if applicable go to Phase 2 report

g) Engineering reports - structural and seismic

h) Geotechnical reports

i) Roof reports (maintenance reports, inspection reports)

j) HVAC condition assessment (maintenance, service history, 3rd party assessment)

k) Electrical Distribution (power availability, upgrades )

l) Outstanding code deficiencies from the city to see if there are any outstanding orders, notices etc.

4) OTHER DOCUMENTS

a) Copies of all service agreements (including fire alarm monitoring, fire and life safety ,mechanical, elevator, plumbing, electrical)

b) Copies of all utilities bills and accounts for 6-12 months

c) Building plans - base building, TIs (cad or pdf files)

d) List of open permits

e) Warranties

f) Building chattels

g) Discuss with the current tenants to see their opinion about the property

h) Summary of open projects

i) Copies of all COIs for the tenants

j) Safety plan

k) Complete Tenants' contact list

4) INVESTMENT ANALYSIS

a) Discounted Cash flow analysis

b) Leasing assumptions for your market (market rents, rent abatement, expected vacancies)

c) Cap rate analysis

d) Financing analysis (if you plan to get a mortgage)

5) LEASING

a) Analyze sales/ lease rates

b) Review city's plans for future developments in the area

c) Zoning review

d) Restrictive Covenants

Hopefully this will make your acquisition / transition successful.

Good luck!
 

eProp Property Experts

Moving forwards, together