CALLING ALL INVESTORS, especially those of you who are new to investing and are looking into purchasing your first rental property. There is a ton of paperwork that comes along with any commercial real estate transaction, but what you may not know is that there are 10 very important seller documents you may have to review when it comes to buying a rental property.
After all is said and done – the purchase and sale agreement have been signed, it’s time to review all documents that comes along with buying a rental house, a multi-family property, or a commercial building which at times can mean that you’ll have to review a ton of paperwork.
Below are a list of documents you’ll most likely receive from a seller after purchasing a new property, you may receive some or at times all of these documents. It’s important to review all of these documents as your due diligence.
1. Seller Disclosures
This document by some states is required by law and in which states all of the defects that they property has. The seller lists in detail anything that maybe wrong with the property to insure that the buyer is aware of the situation at hand.
2. Seller’s Tax Returns
May be the most powerful tool to determine the truth about the property’s finances. They help provide the most accurate representation of how the property is preforming financially. Simply ask the seller for these documents and examine them for any discrepancies.
3. Current Leases
Insure that you’re taking the time to really examine any current leases the property has. Pay special attention to rental rate, length of agreement, and all terms and conditions.
4. Current Rent Roll
This is a current list of tenants and the rental amount they each pay. Make sure to scan these over to insure there isn’t anything funny going on.
5. Tenant Estoppel Certificates
Biggerpockets.com highly recommends getting estoppel certificates for all the current tenants within a property. An estoppel certificate is a document that current tenants fill out – the form documents the tenant’s terms for their leases.
6. Current Year’s Tax Bill
Double check the tax amount with your own numbers – you can easily access this information online.
7. Recent Utility Bills
Utility bills can really put a damper on the finances of a property owner; make sure that you run these numbers and ask the seller for some of their most recent utility bills to help you anticipate future utility costs.
8. Security Deposits
Verify that the security deposit amounts to insure that you are being given the correct cash at closing.
9. Recent or Current Maintenance on the Property
This provides you with the information of the work that has already been completed on the property and what still needs to be done by you in the future.
10. HOA Documents
If your property is governed by an HOA, you’ll want to review the HOA’s declaration of covenants, conditions, and restrictions also known as CC&Rs. This document will inform you of all the things you can and cannot do to the property.
To learn more about visit Biggerpockets.com and check out their article, “10 Seller Documents You May Need To Review When Buying a Rental.”