This week we’ll be heading out to Wabasso to the 28 unit apartment building we’ve purchased to do our inspection.
All week we’ve been receiving and reviewing all sorts of documents from the seller. That’s because we’re in a period of time for the next 30-60 days called the “due diligence period”.
Deciding whether to continue with the sale of a large commercial building is a lot more complicated than buying a single family home. There, you take maybe a week to have an inspector go through the home. Maybe do a radon test. Then you’re done.
After our inspector does a thorough review of the systems of the apartment, we may have specific vendors like boiler experts, roofers, electricians, and plumbers analyze the specific systems.
Then we’ll be looking through the documentation to confirm our assumptions about the property. I’ll be reviewing the following:
-All leases
-Profit and loss statement for the last 3 years
-Check register to compare to the P&L
-Contracts for services like snow removal
-A list of capital improvements for the past 3 years
-All outstanding bills for the property
-Any employment contracts for the building
I will also be having conversations with the building maintenance staff and as many tenants as I can. I want to get the story of the building from the people who see it most.
What am I looking for when doing this? I’m looking for anything that might poke a big hole in the assumptions I’ve made about the building going in. I’m looking for any cost improvements that can be made. I’m looking for any problems that exist in the building that only people who are living there or working there would know.
In short, I’m looking to confirm whether the investment is a good decision or not. Stay tuned…