Writing a Purchase Contract or Letter of Intent (LOI) to buy an apartment building or commercial property can be an exciting experience. It can also be a bit intimidating. This is especially true for beginning investors.
There are a lot of very important items in these documents and you do not want to make a mistake here. This begs the question, “What is the most important clause to include in a purchase agreement or letter of intent?”
One of the most important things you can build into these documents is a clause that allows you to perform proper “due diligence” on the property. Basically you want to make sure that you have time to review all of the necessary financial information, management documents, and fully inspect the property itself BEFORE you finalize the purchase of the property. If things are not what they appear to be on the surface, it is better to find out now – before you own the property than 6 months down the road.
What should I include in a “Due Diligence” Clause when purchasing a property?
Quick Legal Disclaimer: I am not an attorney. This is not legal advice, nor should be construed as such. This is for informational purposes only. Laws vary from state to state and you should seek professional legal advice when necessary. OK, I think we have made our lawyers happy now.
Here is an example of a good “Due Diligence Clause” you can use:
“Seller to provide the following for buyers examination and approval in the next 30 days:
1) All leases
2) All property management agreements
3) All vendor contracts
4) Current Rent Roll
5) Property Income and Expense History for the last two years
6) Year to date property income and expense history
7) Last two years tax returns as they pertain to the property
8) All units, buildings, grounds and mechanical systems.
Buyer may void this contract at any time during this 30 day period if the information found does not meet buyers approval”
Of course you may add or subtract items as needed or change the time limits for your particular transaction. This little contract clause may save you from making a huge mistake down the road, so be sure to save this one for future reference!Do you want to learn more about investing in apartment buildings? Click the link below for my FREE 7-Part Investment e-Course, and I’ll also send you my FREE special report and teleseminar access, “How to Buy Apartments and Commercial Real Estate With No Or Low Money Down.” Download it free here: Apartment Investing. Article Source: http://EzineArticles.com/?expert=Darin_Garman http://EzineArticles.com/?The-Most-Important-Clause-to-Include-in-a-Letter-of-Intent-(LOI)-Or-Purchase-Contract&id=4508720