Due Diligence for multi family or other investment property purchases

Buying an investment property is undoubtedly one of the largest investments one can make. Thus, it is imperative that a buyer do his/her due diligence at the beginning of the transaction and usually before signing contracts. Due diligence, regardless of the type of property, is the investigation of the quality, both physical and intangible aspects of the property being conveyed.

Here is a checklist to assist buyers with the due diligence process. Please note this list is not exhaustive:

1. Take a trip to the local municipality’s building department and search for and obtain copies of:
– Certificate(s) of Occupancy (“CO”)
– Certificate(s) of Completion (“CC”)
– Open Permits
– Violations
– Survey

If obtaining financing a lender will usually require the proper certificates, that open permits are properly closed out, and a survey of the premises be updated.

2. Obtain from the Seller and/or his agent the following:
– Leases with any and all renewals and/or modifications (ETPA, Section 8, DSS and etc.)
– Current rent roll with security deposit
– Current rent arrears
– Notes and mortgages, if debt is being assumed
– Old title policy
– Insurance claims history
– All service contracts
– Copies of real estate tax bills
– Proof of filings for boiler and oil tank and Income and Expense Forms to the County and/or City
– Proof of Division of Housing and Community Renewal (DHCR) filings for past 4 years and signed authorization to obtain a direct copy from DHCR
– Copies of utility bills
– Litigation history
– Research comparable fair market value space
– Engineering Inspection, including a check of:
– Structural and mechanical
– Asbestos, lead paint, mold & underground tanks
– Environmental Phase One and Two, if available

3. Independent analysis should include:
– Contact mortgage broker or your lending institution for current lending requirements and terms
– Prepare an income and expense analysis using projected financing terms
– Calculate return on investment, as well as the potential return based on variations of income, expenses, purchase price and down payment.

This list is not exhaustive and strongly recommend you read my newsletter on due diligence on my website at www.dibbinilaw.com.

If you have additional questions about the due diligence process or need legal representation on a purchase or sale, please call James G. Dibbini and Associates, P.C. today.

Our office also provides legal services in the areas of:
-Cooperative Apartment & Condo Representation
-Property Management Company Support and Representation
-Commercial & Residential Real Estate Closings
-Civil Litigation
-Landlord & Tenant Law
-General Business Law
-DHCR Representation
-Zoning Issues and Variances
-Housing and Building Code Violation Matters