That depends on whether you are buying a newly built apartment deal that has just been fully leased or whether it is still under construction and the lease up hasn’t occurred. Typically an investor would be buying the property once certain occupancy has been completed (90% or more) so my answers will focus more on that scenario.
1. Instead of asking for income tax returns or P&Ls during your DD period, ask for the pro-forma the developer provided to their lender to get financing for the project. Remember to also do your own research on market rents and expenses too.
2. The rent roll need shouldn’t change, you’ll still want to know the unit mix, rents for each style, deposits, size of units, lease end dates, etc.
3. Instead of asking for the last three to six months of utility bills you’ll want to know what utilities the landlord will be responsible for and the projected cost of each, which should be within the pro-forma the developer gave to the bank. Verify these projections by calling the local utility company and getting their thoughts.
4. Instead of asking for a past property tax bill (which would only be a vacant land valuation), the best way to estimate taxes on a new construction apartment deal in the first full year (first full year is the year following a Certificate of Occupancy was granted by the building department), go the property appraiser website and do a property search for apartment complexes that were built in the last 3 years and then calculate what the assessed values were, per unit, for the first full year of each of those projects. That will give you an indication of what yours will come out to. See how that compares to the developers pro-forma assumption give to his lender. It would be smart to also have a “true up” clause that survives the closing on new construction projects. This basically means that the seller agrees to reimburse buyer for any increase in property taxes that was some percentage above the projected property taxes on the proforma at the end of the first full year. That won’t fully reimburse you for the cap rated value you paid but it helps a little.
5. As for insurance, this should already be in place and you’ll want to review the “dec” (declaration) pages to makes sure the proper amounts are in place. Shop his/her dec page around with other carriers.
6. Obtaining the title and survey during DD is still customary in a new construction deal.
7. You’ll still want copies of all leases and any amendments. Because it is new construction, and there will have only been one lease done, it isn’t necessary to obtain estoppels from all the tenants but that is up to you and your lender.
8. As for the “5 Year Capx List” mentioned on the video, since this is a brand new deal you’ll want to instead obtain all the warranty information for all the major components of the project (roof, HVAC, appliances, etc.). It would be a good practice to set up in your management software how long each of these components last per the item specs and enter that info ahead of time so you don’t have to search for it years later if/when something breaks. You’ll want to know the vendor, install date, contact person, warranty period, care info, etc.
9. You will still want the environmental report that was required of the developer by their lender. Your lender may also want either a new report or the current one updated by the same vendor.
10. You will still want to run a crime report, you’ll want to see the leasing traffic log, and you’ll ESPECIALLY want to make sure there are no open permits on the project prior to closing.