What’s a good checklist of items that you need to know to purchase a commercial property?
This link may help…
What is the zoning of the property is a question you want to ask. Is is retail, light, industrial, heavy industrial or what??
Is an environmental study going to be required by the lender?? These can start at $1500 and go up.
What is it going to cost for an MAI appraisal on this property? MAI appraisals start at $1500 and go up.
What improvements are you going to have to make??
Do your homework when dealing with commercial. Some municipalities are more pro business than others and more lax or stringent on their zoning.
Hope this helps you.
Greg C. Wilson
Here’s what I found:
Preliminary Due Diligence Checklist:
Annual profit and loss statements (P&Ls) past 3 years minimum (5 years preferred)
At least one year monthly P&Ls (preferably two years)
Balance sheet (3 years)
Rent Roll including term, deposit, and payment history
Tax returns- 3 years
Insurance: Insurance Policy; including all riders, risk assessments, and disclosure affidavit for carrier
All Existing Loan Documents: including notes, deeds of trust, closing statements, title policy, rate riders, etc., and contact names and numbers.
All Leases: entire copies plus any addendum or riders.
Any service or advertising contracts: (Trash, extermination, maintenance, management, commission agreements, union agreements, vending, billboard, pay telephone, etc. and any instrument or contract to be assumed by Purchaser)
Copies of all recent appraisals, engineering reports, environmental reports
Survey (as-built), legal description, architectural and engineering plans and specifications
Payroll register: List of employees including name, position, wage rate, and entitled benefits
Physical inventory of furniture, fixtures, and equipment, and supplies
Utility bills: Water, Sewer, Gas, Electric (at least two years of monthly statements) (or recap report from provider showing usage and cost)
Bank statements showing deposits for last twelve months (optional)
Phone system documents (y2k compliance letters)
Computer systems (y2k compliance letters)
Fire System inspection reports and y2k compliance
Property Tax tickets for the past three years (real estate and personal)
Litigation History: details of any past or pending litigation (if none, then affidavit from owner)
Comprehensive Due Diligence: Pre-Closing
Engineering Inspection and Survey
Environmental Inspection and Survey: Key Issues: Asbestos, Lead Paint, underground tanks, wetlands
Environmental Phase One: An Environmental Phase One (1) Assessment is an inquiry conducted to determine the environmental status of a property or facility in connection with a real estate property transaction. It follows standards which includes those published by ASTM.
Environmental Phase Two:
Assessments/Subsurface Investigations: These projects include but are not limited to subsurface drilling and sampling, monitoring well installation and sampling, ground penetrating radar, and asbestos and lead sampling.
LUST survey- leaking underground storage tanks
Title Search and policy
Property tax verification
Tenant Estoppel Letters
Mortgagee Estoppel letters
Legal Verifications: licenses, permits, zoning
Wow! How old is that checklist?
I wouldn’t worry too much about whether or not telecommunications systems are Y2K compliant or not in that Y2k happened 5-1/2 years ago!
Either they are working and serviceable or they are not. I would be extremely suspect of a computer that is over 5-1/2 years old as to whether it has much utility left (unless it is serving in another capacity like an alarm panel CPU)…
Go ahead, kick apart the list. But you didn’t read between the lines.
Typical Jersey (“what exit?”) attitude…
I’m not “kicking your list apart”…your original post asked " What’s a good checklist of items…?". If you’re concerned with Y2K compliance, you’re out in someone’s left field…
I’m not reading between lines…you read between the lines. Y2K compliance is a non-factor, period, paragraph. I work in telecom every freakin’ day…if your system isn’t Y2K compliant or there’s no proof that it is – SO WHAT??? It either runs or it shut down at midnight on December 31, 1999…
You can fight over how old the list is, but I appreciate him helping out. Between this list and the link to REIclub’s due diligence, it should help any beginning commercial investor.
Generally speaking, I had no problem with his list, it was relatively comprehensive.
He asked for feedback, got it, then got mad (not to mention rude and belligerent – but, hey, it’s NJ, it’s the norm) because he didn’t like the feedback.
If I was selling something and you came to me to do your “due diligence” and asked me for Y2K computer/telecom certifications, I would laugh at you. It points to a non-understanding of terminology and of the technology that you are pretending to understand because you have a checklist that someone said was great. The bottomline is that the list is dated and needs to be updated. Y2K is a non-issue – probably was then, certainly is now. What should be asked for is the documentation and records for these systems – who maintains them? Is there a maintenance contract? Are the warrantees still valid? If the phone system needs MACs (moves, adds, changes), who does them? What are the costs involved?
If you are going to go to these extremes, where are the systems’ maintenance records? I would want proof that the major systems (HVAC, etc) had received the required/recommended routine and scheduled maintenace, etc.
Again, just my 2 cents…if you don’t like them, don’t spend them.