If you aren’t addressing the items that follow (Principal requirements, investor requirements, property identification, sales contract negotiation, etc), you may have trouble looming.
Principal (The Investor Leading the Project)
• The principal needs to build a resume of relevant experience and knowledge. This should not be a barrier, but it should be a goal.
o Invest in others projects;
o Help support someone’s project;
o Work in the industry;
o Formal studies
• Financials and background
o Pull your credit,
o Complete financial statements:
* Real Estate Assets,
* Securities,
* Notes owed,
* Notes owed to you,
* Income from jobs or investments,
* Personal Property,
* Guarantees
o Develop sources / liquidity (not required, but helpful),
o Tax Records
Investors
• Accredited status
• Address
• Phone numbers
• Email address
• If greater than 10% owner, financial statement
• Understand their personal situation
• Understand the condition of their balance sheet
• Understand their investing goals
Identifying the Project
• LoopNet
• Local brokers
• MLS
• Craigslist
• Develop deal flow by establishing contacts to forward prospective deals
• Practice evaluating deals
• Develop value add scenarios
Sales Contract to Closing
• Develop detailed representations and warranties
• Learn from the war stories of others (build your network)
• Include a due diligence period
• Have a detailed due diligence check list
• Ensure you have qualified experts for the due diligence items
• Stay on top of reports:
o Survey (Alta and details from lender prospects)
o Appraisal
o Property Condition Report or Inspection Report
o Phase I environmental
o Title Search
o UCC Lien Search
• Prepare your market study including traffic analysis
• Prepare your business plan
• Prepare your financial plan
• Prepare your project schedule
• Complete improvement bids
• Work from a Letter of Intent first
• Work from a sales contract next
• Have a detailed due diligence list for the seller to deliver
• Understand your mandatory deal options and you optional items
• Prepare a closing schedule
• Prepare a closing day check list
Closing and Closing Activities
• Complete your closing day checklist
• Check of on all reps and warranties
• Remind the seller of post sale warranties
• Save all documents with your lawyer from closing including:
o Copies of leases,
o Copies of resident files,
o Photos of the property,
o Photos of each building,
o Photos of all amenities and common areas
• Save most recent month and past year financials, rent rolls, aging summaries
• Capture contacts for contractors and suppliers
• Hire staff or select management company
Post Closing Operations
• Contractor agreements,
• Supplier agreements,
• Customer Service needs
• Website on
• Advertising
• Accounting and Finance
• Tax
Exit, Refinancing, or Sale
• Manage expenses for sale,
• Manage improvements for sale,
• Assure books are ready for sale,
• Professional photos,
• Capture surrounding market info including housing prices, comparative rents, etc.
• Assure your rent roll is ready with the right residents in the right units.
Conclusion
While the above items cannot and should not be considered complete, the investor/principal can use these as a guide to assist preparing to invest through the exit. Over the course of time, this document will be linked with other parts of the site to provide a simple organizational means for the member to locate information supportive to successful investing.
