Tips And Tricks To Investing In Commercial Property For Profit
Topics: commerical real estate
Of course, there will come a time when you are going to want to make an offer on a property. Remember, this is where a good broker is worth their weight in gold; how they can direct you as far as price, how to structure the offer, terms, etc. This of course is very, very important. However, we are going to specifically deal with apartment properties so I’m going to give you some do’s and don’ts when it comes to preparing the offer that you may want to keep in mind. Do Arm yourself with contingencies. Now, whatever you do, you don’t need to put 45 contingencies in the offer. Just use enough contingencies to make sure you’re protected in the event you find out things aren’t going to be working out. Here are the top contingencies you will want in any offer you make on an apartment property.
Subject to inspection and acceptance of all of the apartment units. Subject to inspection and acceptance by buyer of last two year’s tax returns. Subject to inspection and acceptance of current rent roll. Subject to inspection and acceptance of all leases. Subject to financing being satisfactory to buyer within x days of offer acceptance. Owner not to change, renew, or modify any existing and/or new lease agreements without express permission by buyer between days of offer acceptance and closing. Subject to buyer completing and facilitating a 1031 tax deferred exchange. The subject property will be replacement property to fulfill section 1031 requirements. (You use this when you are buying a replacement property for a tax deferred exchange. Most any offer you’re going to want most, if not all, of the above contingencies.
They will make sure you are protected in the event things don’t work out, you find out the information you’ve been given is wrong, or you find out that the financing won’t work, etc. Be sure you give yourself plenty of time to work through the contingencies and make sure that you make the offer in such a way that you have to release the contingencies, that the contingencies don’t expire on their own. In some offers, it is written that if you do not address any of the contingencies within a certain time period, they are released automatically. You don’t want that do be the case.
Don’t come to the table with too little earnest money. That’s right, you read correctly. Don’t come to the table in your offer with too little earnest money. You want to be taken seriously and you want the seller to work with you. Of course, conventional wisdom tells you that the little amount of earnest money as possible means little risk for you, it also means that you’re small potatoes, bush league, small time. You don’t want to come across that way. You don’t want $400,000 in earnest money either, so don’t get me wrong. Use a fair amount of earnest money. In my opinion, you should use 1-2% of the offering price as earnest money.
Special offer to help you make it in the commercial real estate world right now. commercialprofitblueprint.com Donner
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