Due Diligence Report
tell the investor what the balance of the existing loan is, what the interest rate is, what the percentile is of renters versus home owners in the neighborhood and that would be just the beginning of what I should put on my due diligence report. What else should I have on it?
Here are a few more things to add.
zoning compliance
city and county code compliance
environmental
This is pretty much my due diligence report is there anything I missed?
1. Financial statements
2. At least one year of monthly P & Ls (preferably two years)
3. Balance sheet (three years)
4. Rent roll including term, deposit and payment history
5. Tax returns - three years (five years preferred)
6. Insurance - policy, including all riders, risk assessments and disclosure affidavit for carrier
7. Existing loan documents including notes, deeds of trust, closing statements and title policy rate riders
8. All leases, entire copies plus any addendums or riders
9. All security deposit records
10. Any service contracts - trash, extermination, maintenance, management, commission agreements, union agreements, vending, billboard, pay telephone, etc. and any contract to be assumed by purchaser
11. Copies of all prior appraisals, engineering reports, environmental reports
12. Survey (as built), legal description, architectural and engineering plans and specifications
13. Payroll register, list of employees including name, position, wage rate and entitled benefits
14. Business licenses
15. Utility bills - water, sewer, gas, electric (at least two years of monthly statements) (or recap report from provider showing usage and cost)
16. Fire system inspection reports
17. Property tax bills for the past three years
18. Litigation history - details of any past or pending litigation (if none, then affidavit from owner)
19. Tax appeal status, if any
20. Department of Community Affairs (DCA) "green card" with prior inspection reports
21. When considering the external physical conditions of a target property, an informed purchaser is well advised to secure the services of a licensed inspection service. Depending on the nature of the physical attributes of the property, the following items should be considered:
21. Engineering inspection and survey
22. Environmental inspection and survey; key issues: asbestos, lead paint, testing of underground tanks, wetlands
23. Environmental Phase One
24. Environmental Phase Two
25. Assessment/Subsurface Investigation if recommended by the Phase One inspection, which may include but are not limited to subsurface drilling and sampling, monitoring well installation and sampling, ground penetrating radar, and asbestos and lead sampling
26. Survey for abandoned underground storage tanks
27. Type of roof - consider number of layers of roofing material installed and identify evidence of damage
28. Assess leaks or moisture damage inside the structure (both roof and basement)
29. Drainage system should direct water ways from the structure
30. Availability of municipal water and sewer
31. External electrical connections and boxes
32. Condition of chimneys. If the chimneys are masonry, are there signs of loose mortar. If the chimneys are metal, are there signs of rust or corrosion
33. Cracks in sidewalks or driveways that are large enough to present a tripping hazard
34. Condition of any retaining walls. Signs of movement
35. Major cracks, bulges, or other visible signs of settlement in the foundation. Condition of the exterior surface of the foundation, especially at ground level
36. Has the septic tank been cleaned and inspected
37. Have handrails been installed where needed
When considering the internal conditions of a particular piece of improved real estate, one should consider the following items:
38. Are ground-fault breakers installed at bathrooms, kitchens, outside and other wet locations
39. Have modern garage door openers been installed that will reverse if someone becomes trapped underneath
40. Age of heating system - equipped with modern safety controls; also when it was last serviced
41. Signs of rust corrosion or scorching around heating unit
42. Sufficient source of outside air provided to the heating system
43. Condition of piping or ductwork
44. Test heating equipment for carbon monoxide production
45. Carbon monoxide alarms installed/tested
46. Smoke detectors installed/tested
47. Cracks or bulges at the interior finish surfaces
48. Do doors or windows bind in their openings, or are the openings out of square
49. Are interior floors level
50. Is there any earth/wood contact in the crawl space or basement
51. If there sufficient fireproof barrier to utility rooms and garage
52. Is there sufficient electrical service
53. Is structure insulated to typical standards
54. Was urea-formaldehyde or asbestos-containing insulation used
55. Property serviced by private water or sewer systems.
56. Water-potability test and a drawn-down test
57. Main water shut-off valve operational and accessible
58. Is there a main sewer clean-out
59. Is there sufficient water pressure
60. Age of water heater and properly installed temperature and pressure relief valve
Well
Bargain76 why do you say that? Sometimes buyers are more interested in buying if the due diligence report is already done. What if you just find houses still not important?
I am really interested to know what you think?
What about city assements?
Where are you getting the 20k to rehab?
The 18k to purchase + 20k to rehab are coming from hard money. When the rehab is complete I should be around a 60% LTV then I will refi into a normal conforming loan.
Quote:
On 2007-09-26 06:11, bgrossnickle wrote:
Where are you getting the 20k to rehab?
If a duplex that can be purchased and rehabbed for 38k and has rent of $500 each side, then it sound like a winner just from that. You do use conservative #s, good. What city is this property in and can you really get $500 each side of the duplex? What are other properties renting for in the area??