Simple Question

99% of the time, it's all part of your due diligence research on the property, and vital to your decision on if/how to buy and sell it.

Once you get the info from the seller you must then determine it is accurate!! Sellers hardly ever supply accurate numbers. NEVER go by a "pro forma" Never. Seller must produce:
Past two years of operating statements
Year to date operating statement
Rent roll from last two years
Past six months bank statements
Existing loan docs.
Security deposit account statement
Utility Bills
Property tax bills
Any service contracts
Payroll register
Insurance policy and claim history
Capital improvement and Maintenance log
Any incomplete maintenance requests.

Then you must do physical and legal due diligence on the property.

Unless you are talking about a duplex or quad. Then you can just run your numbers, check for deferred maintenance, what the cash flow is and make your offer based on what the property is currently producing, not what it can produce.

Michael Mangham
Mentoring/ Team Building Nationwide
MD Home Acquisitions LLC

How long does it usually takes to get through analyzing all the documents you named? Here in Boston properties get picked up fast, and I dont want to spend too much time crunching down numbers if i dont have the propety under contract. Would it be stupid if I go with the pro forma numbers just to get the property under contract, and once I finally do I could start the real due diligence process?

I also want to know what is a

What is a payroll registry?
What is a leasing and capital cost, preparation cost, and capital reserves?
Would I also need to collect any warranties?

Thanks for the help.

O ok. I'm going to do it by myself for now, and once I start building a portfolio I'll delegate the job to a property manager.

It can take 5 minutes or it can take hours. If you know the area you can look at the numbers and see if its accurate. Knowing the area is an advantage because you can tell right away if the numbers match.
Raymond

Would it be stupid if I go with the pro forma numbers just to get the property under contract, and once I finally do I could start the real due diligence process?

With an apartment, you present a LOI - letter of intent- to purchase. In that letter you give yourself 30 or 60 days to conduct the due diligence. Then depending on the results you can move forward or not. Purchasing an apartment is different than a SFH - be sure to work with someone experienced in this.

The broker wants me to sign a Confidentiality agreement. I dont know if I should sign it though. They said must real estate brokers are snakes.

1st, i don't use the proforma for much of anything because that is just what COULD be possible with the property performing top notch. the property probably isn't there and you can't count it toward your offering or much else. realtors, brokers, sellers want you to use those future, possible numbers hoping you will pay more for the property than it is worth at present. you never buy at FUTURE possibilities.

2nd, usually the confidentiality agreement is to protect the seller and you shouldn't have a problem signing it. it is for their protection so you're not telling anyone else their private business. they are sharing it with you for a sale, not to make it public. be sure to read it through and understand it. if you don't, ask questions to be sure. you shouldn't have a problem signing it.

just my 2 cents.....

My experience in aggressive areas it is usually investors that are driving the market. We are seeing a lot more investor these days driving the market. I just went to California doing a training seminar.

All the investors there we worked with said that they are now receiving multiple offers for their properties. That means the prices of properties will be going up and they will be seeing appreciation again.

The only factors that will change that is the economic news and jobs, or the market then become over saturated with properties again and the DOM goes up.

My feeling is we will be seeing more and more of this across the country over the next few years.

There are a bunch of real estate development going on in my city, which could be a sign that the economy is getting better (I dont know yet for sure).I'm going to talk to the economic development commitee tomorrow.

I'm looking at the rent rolls for a property and 3 tnenats have a "tenants at will", does that mean tenants arent paying rent?