The Due Diligence Process Plan Handbook for Commercial Real Estate Investments
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Book preview
The Due Diligence Process Plan Handbook for Commercial Real Estate Investments - Brian Hennessey
Due Diligence
by Brian Hennessey
EPUB Version
Copyright 2013 by Brian Hennessey. All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission. For information, address Colliers, 601 Union Street, Suite 4800, Seattle, WA 98101
USA. Or call us at Tel: +1 206 695 4200. Please visit: www.colliers.com
This ebook is licensed for your personal use only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please obtain an additional copy for each recipient. If you're reading this book and did not purchase it, or it was not purchased for your use only, then please obtain your own copy. Thank you for respecting the hard work of this author.
Table of Contents
Chapter 1 During Negotiations of Purchase & Sale Agreement
Chapter 2 The Purchase & Sale Agreement Is Executed
Chapter 3 Other Critical Issues That Must Be Explored
Chapter 4 Energy Savings, Cost Cutting Tips and Other Items
Chapter 5 Mechanical and Physical Inspections
Chapter 6 Review of Property's Books and Records
Chapter 7 Underwriting and Financial Analysis
Chapter 8 Heading Towards the Finish Line
In Conclusion
Exhibit A: Sample Lease Abstract Form
Exhibit B: Due Diligence Checklist
Exhibit C: Due Diligence Document Checklist
Exhibit D: Sample Tenant Questionnaire Letter
Introduction
This handbook was created to save investors time and money and to avoid the potential pitfalls in purchasing commercial real estate, as well as give an overview of the due diligence process. It is written in a concise pragmatic fashion as a real due diligence tool and is not intended as a voluminous textbook of information on the subject. It is based upon over 27 years of experience in the commercial real estate business and acquiring over 9 million square feet of office properties, from private and institutional owners. The fundamentals remain the same whether you're acquiring residential rental properties, an industrial building, a skyscraper or a shopping center. Many of these lessons covered here were learned the hard way.
There are two ways to learn; from your own mistakes or from others mistakes. It's always easier and cheaper to learn from others mistakes. I am hoping this handbook will be a useful tool from which investors can avoid mistakes in the due diligence process and gain a better understanding of the salient due diligence issues. Some of the ideas and proven tips could easily save an investor tens of thousands of dollars. Each and every time you purchase a property, a unique set of circumstances presents itself - the owner, tenants, building construction, etc - as a learning experience that you can add to your own knowledge base. I only wish I could have had this information available when I first started out purchasing properties. Just the cost cutting tips alone are worth thousands of dollars.
The whole purpose of the due diligence process is to discover the potential problems with a property, reveal any hidden profit potential, and to verify all information that you have obtained. All this intelligence
will enable a buyer to make an informed decision on whether to move forward, or not, with an acquisition. In short, a thoughtful due diligence process will afford the buyer confidence that once the acquisition is complete, there will be no material surprises. It is vitally important that everyone on your due diligence team is on top of their particular assignment in the process and that communication lines are open to everyone on the team.
The due diligence process is only one aspect of the commercial real estate purchase transaction, but it is of fundamental importance. For beginning investors, this handbook will provide a useful and efficient resource to cutting through the minutia and focusing on the important issues as well as providing a number of cost savings and