Updated publication from Brian Hennessey, a 30 year CRE veteran and former SVP of Acquisitions & Dispositions whose client list included Fortune 500 Tenants Bank of America, The Walt Disney Company, DuPont and Baxter Healthcare.
The Due Diligence Handbook For Commercial Real Estate: A Proven System To Save Time, Money, Headaches And Create Value When Buying Commercial Real Estate
was written originally as a personal reference tool/checklist because of the many facets and volume of information that is needed to be remembered for each transaction. Since each transaction is unique, there are many lessons that were learned, that were added over time, so that similar mistakes and lessons, some of which were expensive, embarrassing and humiliatingly “gut wrenching”, did not have to be re-learned. It is a proven system that makes the entire buying process easier and is useful in any commercial real estate investment purchase, from the smallest to the largest. Investors at all different levels have found it to be an invaluable tool.
The book covers a wide gamut of topics:
There’s a huge problem in the commercial real estate business that nobody is talking about- DUE DILIGENCE.The vast majority of investors, real estate brokers and commercial real estate professionals barely scratch the surface conducting their due diligence when purchasing commercial real estate investments.Investors are taking unnecessary risks and throwing money away or making bad investments, by not properly performing due diligence. In fact, they are leaving big money on the table without even realizing it. Brokers are putting themselves at risk for potential litigation and missing an opportunity to help their clients as a true ally by learning these principles.All because “they don’t know what they don’t know”. I was in the same position, until I created a system that made the entire process easier and less stressful. Having and adhering to a proven system allows you to do it faster, easier, more efficiently and you’re less likely to miss something. It reduces the stress; makes you feel more confident; makes the sellers of the properties less likely to try to play games while negotiating with you, and ultimately helps to make you a better investor because you are more prepared.This handbook gives you a process to follow. A “road map” that takes you through from beginning to end. It is written in a concise, “easy to follow” fashion as a real due diligence tool and is not intended as a voluminous textbook on the subject. It’s based upon over 30 years of experience in the commercial real estate business and acquiring over 9 million square feet from private and institutional owners.The fundamentals remain the same and they are all applicable, whether you’re acquiring residential rental properties, an industrial building, a skyscraper or retail shopping center. Some of the things you will learn from the book . . .
- What to negotiate in the purchase and sale agreement so that you can maximize the opportunities for yourself when it comes time to negotiate further with the seller.
- Essential provisions to ask for in the purchase and sale agreement. (These could end up costing you dearly later if you don’t have them in there).
- Specific issues and provisions to look for in the leases. (These could be potentially devastating to the investment after you own it).
- Conducting tenant interviews and what questions to ask so that you can uncover any problems or issues (This can be a goldmine of information).
- Cost cutting tips and dozens of strategies that will help you add value to the property once you own it.
- One of the most critical processes done during the due diligence process is the underwriting and financial analysis, which is constantly being revised during that process. (Included is a list of essential questions that must be addressed.)
- How to ensure that you are getting all you deserve when finalizing the transaction and what to look for on the closing statement to make sure you are. (Most investors leave a lot of money behind by not knowing this information).
In addition, you get at the end of handbook . . .
- Sample Lease Abstract Form (which shows you how to summarize all the main deal points and provisions of a lease document).
- Due Diligence Checklist
- Due Diligence Document Checklist
- Sample Tenant Questionnaire (a sample list of questions that you should ask of tenants when conducting a tenant interview).
By having this knowledge and my “step-by-step” system, you will be more prepared and less stressed; more confident in your ability to negotiate and go up against any seller.
There are too many things to remember during the process. We need reminding as much as we need learning. Get it now and be prepared for your next real estate investment. Many investors keep it as a constant companion when purchasing real estate.
