Could anybody with experience please help? Have a few newbie questions here.
Whether you’re dealing directly with the owner or through an agent, what do you typically request before submitting an LOI? Rent roll? Financial statements? Or do you do that as part of the due diligence after you submit an LOI?
If you do decide on making an offer, do you typically put down a deposit or can you set it up to make a deposit say, 2 weeks after the acceptance of the offer, so that you can try to find investors to go in on the deal with you? This way, one wouldn’t need a lot of money to start finding deals to tie up?
Thanks in advance,
First of all, I would not look for real estate first unless you have buyers or partners for the real estate that you are looking for first.
Secondly, Know how much you can get financed and your lending paramaters first if you are planning on getting the deal financed through a traditional lender. Why would you make
an offer on a property if you don’t know how much it will qualify for on the financing side.
Thirdly, an LOI is a nonbinding agreement. That being said, If you want to establish a good, reputation, I would not send out an LOI on every property I come accross. In most markets
Apartment owners, Investors, and realtors are very tightly nit.
If I were you I would line up my investors first.
thank you for your thoughts. Especially on the LOI. I’ve working on the residential side for many years and once you put in an offer, and it’s signed by the other party, you now are in contract, so the world oc commercial LOI’s are very new to me.
Point well taken regarding having investors ready. Thus, my reason for posting another post on if anybody had a simple (well, I guess not so simple since I don’t know how to put one together) excel spreadsheet on showing the rate of return should one have investors.
In regards to financing, I am pretty familiar with general underwriting parameters. 60 to 70% LTV from a local bank I’d think would be conservative in this market. Obviously the NOI and cap rate will dictate what value the bank will use as the value. However, it’s always those little details that bug me, so something as simple as knowing that an LOI isn’t binding is a huge lesson to me, thank you again!