So you've finally taken the steps to get that multifamily property under contract
and now you're stuck because you don't really understand the due diligence
process well in this video I'm going to share with you exactly what the due
diligence process is and why that's a benefit for you as a buyer coming up! Hey
there it's Billy with KeePon Cashflow helping you to grow your money and your
mindset so that you can get closer to the lifestyle that you want to lead
faster now in this channel we're gonna be sharing lots of tips and strategy
videos just like this so if it's your first time here you're going to want to
consider subscribing and you're going to want to make sure that you check out the
comments and the links in the section below lots of really great stuff
happening there but as for today I want to get back to helping you understand
what is the due diligence process and why is that important for you as the
buyer of a new multi-family property and if you stay around to the end I'm going
to share a ninja tip with you just before I ask the question of the day and
so first of all what is the due diligence process and why is it
important in the multifamily space first and foremost you probably your parents
probably told you exactly like mine told me but when you here's when someone
tells you something trust what they say and at the same time go out and verify
and the due diligence process is nothing more than that it's just a chance for
you as the buyer to make sure that everything that you've understood up
until the point of getting the property under contract and was exactly what the
seller conveyed to you or told you and so I want to share a couple of different
steps in the due diligence process to just make sure that what you understood
about the property is exactly that that the the difference is between what you
think and the seller thinks are as few as possible and I thought what better
way to do that then actually share one of the documents that I use and that my
company uses so it's a it's a pretty lengthy 7 page document but let me just
take you through a couple of what I consider to be the the most important
steps first of all you're going to want to think about who are the different
contacts who are the different players who are the the attorneys the brokers
who are the the accountants that are be working on on this particular
transaction that is one of the things that's really important also think about
some of the different consulting reports that need to take place as a second step
so these would include things like a phase one report they would include
things like a structural survey etc and then if you think about the Third Point
in the due diligence process or at least a third one that I would like to share
with you today you want to think about your operational documents and what do I
mean by that so you can think about your property management agreements that you
have in place you want to review those you want to review some of the different
the leases that were on the that the current owner has and you want to think
about a financial audit and when I talked about a financial audit within
the operational documents you want to make sure that you understand what is
the physical occupancy which is one thing which is how many people are
actually in the buildings and then another thing that I see a lot of people
with less experience miss is what are the actual economic occupancy which
means there are people there but how many of them are actually paying and
depending on how tight your process is that you should have your economic
occupancy and your physical activity as close as possible to one another let's
move on to the fourth area you can talk about or look at things like the
existing insurance do they have liability insurance what
type what types of coverage do they have fire or casualty those are really
important areas for you to know about as as a new potential buyer after that you
also want to think about things like the service contracts and when I talk about
looking up the service contracts or things like your your HVAC things like
your janitorial or if you have landscapers anyone who is providing
another service to this property you want to look at what are the historical
costs and also understanding what has been there and then next you want to
look at things like utilities as well because depending on if you're paying
for the utilities or your company or the residents or tenants that's an important
part of the operational expense that could that could impact the purchase
so make sure that you look back and you see exactly what those utilities were in
the past because that will help you to also look forward in understanding what
your potential costs or exposures could be moving forward so I guess I would
like to leave you with things like also that if there are any financing
documents if you're gonna be using financing or if the previous owner had
financing those are different types of documents you want to look at and then
lastly you're gonna want to look at the the closing documents and who is
responsible for what the payments and making sure that that the closing table
that that everything is absolutely crystal clear for both you as the
pretend well as for the seller and so since you've stuck around to the very
end there is a ninja tick trick that I want to share with you and it's
something that I want to make sure that you do because it's going to really help
you now as we talked about a number of different steps at least that I think
are really important for you to know in the due diligence process one thing that
you want to be able to do is from the very beginning is have the property
management company that you're going to be working with have them involved in
the entire process because at the end of the day once you your company or you
take over this particular multifamily building or complex they're going to be
responsible for making sure that the improvements are taking place and the
stabilization of the property or the the consistent running of the property is
taking place but that's a that's a key trick a key ninja tip is just to make
sure that the property management company is involved from the very
beginning of the due diligence process so now I want to leave you with the
question of the day my question to you is which of the steps that I've shared
with you today in the due diligence process do you find to be the most
beneficial for you and and why so this is Billy keels with KeePon Cashflow
it's my two cents for today and as always ...Hasta la próxima!
under no stops Thunder no stops Thunder no stops hey there in this on this
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