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?

Comments(7)

  • cjmazur20th September, 2007

    Here are a few more things to add.

    zoning compliance
    city and county code compliance
    environmental

  • hunt10422nd September, 2007

    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

  • hunt10426th September, 2007

    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?

  • hunt10426th September, 2007

    What about city assements?

  • bgrossnickle26th September, 2007

    Where are you getting the 20k to rehab?

  • CTWolfe26th September, 2007

    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?

  • rickpozos2nd October, 2007

    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??

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