Due diligence - what inspectors do I need?
I'm finally under contract for an 8 unit MF building! Previously the buy side broker I've been working with had been suggesting using multiple inspectors (specialists for items like plumbing, etc). They seem to be insisting on a single guy now. Should I be getting more than one inspector and can someone suggest what type of inspectors I want? It's an older building.
[{"id": "fftvnxe", "text": "On top of inspections, you need to get an updated survey and proof of utility availability. I'd also recommend a zoning report, as they're usually pretty cheap.     \n\nWhen it comes to inspections, it depends on how in depth you want to go. At a minimum, I would get someone to do a PCA (property condition assessment). They should be looking at any documents available pertaining to architectural, civil, mechanical, electrical, fire and life safety, survey. On-site, they will look at sitework, building mechanical systems, fire and life safety systems, mechanical electrical and plumbing systems, vertical transportation systems (elevators), etc. You can usually ask them to also look at ADA compliance, as that can be an issue if you plan on making any renovations. They will then provide a summary of findings and estimates of any costs needed to remedy the issues that they find. Their estimates are usually high.     \n\nNext, if you're concerned about environmental, I would have someone do a Phase I. You can include asbestos here if you feel like that's an issue. There are a lot of groups out there that can do PCAs and Phase I reports.", "replies": [{"id": "ffu4qls", "text": "He\u2019s going to have to do a phase 1 for the loan.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ffu0eyb", "text": "Only thing I want to add to this is that in my experience a PCA consultancy usually different specialists to cover multiple needs.", "replies": [], "depth": 1}, {"id": "ffu4ozt", "text": "Go get this book on kindle and read it: The Due Diligence Handbook for Commercial Real Estate- Brian Hennessey. It will help you out immensely.", "replies": [{"id": "ffu5l68", "text": "While his book is good it\u2019s focused on commercial real estate and brings up items that aren\u2019t necessary or possible with Multifamily tenants. It isn\u2019t a good guide for a MF deal but it is good knowledge to have.", "replies": [{"id": "ffu5qqp", "text": "It\u2019s an overview. He discusses MFR projects in there too. OP is starting from a very low basis. For an 8 unit deal, it\u2019s probably about right, IMO.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ffu5e3m", "text": "If you are getting a loan you\u2019ll need the following:\n\nSurvey\nPCA\nPhase 1 Environmental\n\nA zoning letter would be good to get too and shouldn\u2019t cost between $500-$600 but may be more or less depending on the municipality. \n\nMake sure you walk every single unit and check for general condition, water damage, confirm all appliances work, no leaks, etc.  It would also be smart to confirm sf of units although sometimes the PCA person will do it for you.", "replies": [{"id": "ffu8r0j", "text": "interesting info but im a little confused about walking through every unit, how is this possible if there are tenants inside?", "replies": [{"id": "ffufrn7", "text": "You have the owner notice the tenants that he will be entering their units for an inspection. You absolutely need to see the interiors of each unit before you purchase the deal. You have no idea what the condition is and for all you know the building is 8 hoarders and it\u2019s going to cost $20k a unit to turn. You should take notes/photos of each units interior.", "replies": [{"id": "ffugayl", "text": "oh, i didnt know that was possible. So is that a state-specific thing or all states?", "replies": [{"id": "ffujui1", "text": "The amount of time varies but as long as you give a tenant proper notice you are well within your rights as a landlord in any state to enter their unit for inspections/maintenance.", "replies": [{"id": "ffv2chj", "text": "I would stipulate that the seller be required to provide estoppels before or at closing. This will confirm the amounts current rents, deposits and that all rent accounts are current. This is an extra step beyond leases and lease agreements but well worth it.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]