Longer lease terms.
Cost Of Entry: While it is very possible to obtain commercial real estate loans even as a newbie investor, the cost of investing in Multi-family real estate is most certainly less than other commercial real estate.
Performs Better In Economic Crisis: Housing is always in demand (despite the state of the economy).
Good return on investment.
Pride of ownership.
1. Identify property
2. Negotiate the deal.
3. Identify and choose a lender.
4. Procure from seller all documentation required by the lender.
5. Get preliminary title commitment from the title agency.
7. Negotiate remedies for any problems found in the inspection.
8. Amend the contract if needed or anything changes.
9. Ensure the appraisal is done and it is a proper one.
10. Ensure underwriting is done on time.
11. Set closing date.
Unlike residential deals where a contract is issued with a purchase price by the buyer and if the seller signs it, you are in-contract, commercial deals start with a non-binding LOI.
LOI spells out the following terms:
1. Purchase price.
2. Amount of earnest money deposit being offered.
3. Buyer’s choice of the escrow agent.
4. How the balance of the purchase price will be paid.
5. Within how many days the buyer will execute a purchase contract after all terms are accepted.
6. How long the feasibility period is.
7 How many times and for how many days the buyer has an option of extending the feasibility period (if any).
8. If there is any additional deposit being offered if the buyer exercises this option.
9. If the deposit is refundable.
10. Within how many days the buyer will close after expiration of the feasibility period.
11. What the real estate broker commission is and who pays it.
12. What documents the seller will have to provide and within how many days.
13. How the closing costs are split between the buyer and seller.
The LOI is drafted as a document that is sent to the sellers. From there, the sellers would “red-line” the document with changes that he/she wants and the buyers can counter these on the same document with their “red-line.” If lawyers are involved, they will also add their own comments and changes to the same document. This can go back and forth a number of times until all terms are agreed on by both parties.
Based on the final version of the LOI, the buyer then submits a draft contract that will contain other legal terms. This too can go back and forth as a red-lined doc. Once this is finalized, we are in contract!
You start by getting pre approved (even before you start looking at properties). We help with getting pre approved by lenders.
Get preliminary financial docs like rent roll, P&L statements, and lease summary.
Analyze and start communicating with lenders. Negotiate loan terms, underwriting time, the time needed for the appraisal, appraisal process, etc.
Determine the purchase price and issue an LOI and start negotiations.
If all terms are agreed upon, collect:
a. Full copies of the last 3 year’s property federal tax returns or profit & loss statements.
b. Year-to-date profit & loss statements.
c. Current rent rolls.
d. Copies of lease agreements.
e. Most recent surveys if available.
f. List of capital improvements with costs made over the last 3 years.
g. Taxes and assessments.
h. Copies of any leases or other documents relating to the property, including service and maintenance contracts, equipment leases, utility agreements, management agreements, parking agreements, and cross-access agreements.
i. Utility bills for the property from the past 12 months.
j. Any existing warranties on the existing mechanicals and/or building.
k. Copy of recent roof replacement/repair invoices, warranty, transfer documents, and all information pertaining to any roof replacement or repairs.
Get a term sheet from the lender.
Make sure the appraisal is done on time and confirm with the lender that the appraisal report is in, then set the closing date.