DUE DILIGENCE CHECKLIST FORM
DUE DILIGENCE CHECKLIST FORM
Few tools will be more important to the seasoned investor. Proper and complete due diligence on any real estate purchase is of paramount importance. There's an old saying: "You make your money on the buy". And that's true. But if you miss a crucial problem, then you can also lose money on the buy. The possibilities are too numerous to list, not to scare you, but just to open your eyes. A good Due Diligence Checklist can help you see a property for what it really is. Below is the one that I use. I'm not recommending it, nor am I guaranteeing its completeness or accuracy. I present it to you here purely as a demonstration of what a Due Diligence Checklist can look like, and how to use it. You can start with one like mine, then customize it to your own needs, or the special circumstances of the park in question. Check everything you can and hire a professional to inspect the things you can't. It's money well spent.
INSPECTIONS & OTHER DUE DILIGENCE
The above Due Diligence Checklist, even if it were perfect, which it is not, is only the beginning. It is after all just a checklist of the things you should ask for, or examine for yourself. As part of your due diligence, you may want to employ the services of experts and/or inspectors in a variety of fields. They can help you look for things that only an expert might recognize. Inspections of this type cost money, and some are fairly expensive, but depending upon the circumstances, and the amount of money you may have at risk, it could be money well spent. Some examples of experts and/or inspectors to consider:
TERMITE/PEST CONTROL - If there are buildings involved, especially residential units (not MHs or RVs), and if they have some value (in other words, not rickety old tool sheds), you may want to consider having them inspected by a licensed pest inspector for termites, dryrot and other wood-destroying pests. Estimated Cost: $150-$2,000 or more, but usually around $300 per building.
NATURAL HAZARDS DISCLOSURE STATEMENT (NHD) - Standard in most real estate purchases, the seller normally pays for it. It states all public information regarding the property's proximity to earthquake faults, flood zones, toxic waste sites and the like. Estimated cost: $100 +/- (usually paid by seller).
WELL / SEPTIC INSPECTORS - If the park has either a well or a septic system, ideally you want to hire the same company who has been servicing it all along (unless there is some reason not to). Pay for a full inspection, this is very important. Estimated cost for a well inspection: $300 per well +/-. Estimated cost for a septic inspection $500-1,000 per tank +/-.
SEWER LINE CAMERA -These guys run a snake down the sewer lines with a light and a camera on it and they film the entire length of your sewer system, looking for breaks, roots, "bellies", and other problems. Can be costly. If there is no history of problems, you may want to save your money. Estimated cost $600-2,000.
SURVEYOR - Another expensive item that you may not need. If the lots lines are clearly defined and there are no disputes over them, them you may want to consider saving your money. If, however, there are disputes over the lines, or you're not sure, and the difference could be important, then a Surveyor is usually the only remedy. Estimated cost: $2,000-$10,000+.
LAW ENFORCEMENT - Visit the local Police or Sheriff office and ask them what they can tell you about the park. You may be surprised what you'll learn. Don't pass up this vital step, and its FREE!!!!
CITY & STATE - Make sure there are no violations or pending changes in the rules that could affect the park.
CONTRACTORS & TRADESPEOPLE - If there are large repairs that need to be done, get several contractors to look at the work and give you bids on it. You can even use the higher ones to help negotiate with the seller. Again, this is an important step that is FREE.
THE POWER OF OBSERVATION - Consider spending a full day or two in the town where the park is located. If you aren't local to it, get a hotel nearby, have dinner there, and ask everyone you meet what they've heard about that park. Then, go park across the street at different times of the day and night and observe what is going on, what the people look like. Go in the morning when people are leaving for work. Go mid-day when people should be at work. Go just after 3pm when the kids are walking home from school. Go at 6pm when everyone gets home from work. Then go at 8pm, and every hour after that until it goes totally quiet. Take notes. (A word of caution here: don't risk your safety, don't stand out, don't draw attention, don't take pictures, and be ready to leave at any time if you feel your safety is threatened.)
TALK TO THE MANAGER & TENANTS - This is only to be done once you are in escrow and during your due diligence period. And only with the sellers' knowledge and permission. Once you have it, meet with the Onsite Manager, and be prepared with a list of questions. Walk the entire park with the Manager with him pointing everything out to you, good and bad. Talk to any tenants you meet who are willing to talk to you. Try to do this away from the manager so that they will feel free to talk openly with you. Most will complain, so expect that.
MEET THE OWNER AT THE PROPERTY - While realtors often discourage this, we believe its important to know who you're dealing with. I usually walk the entire park with them also (this could be done at the same time as the Onsite Manager), then sit down in the office or a nearby coffee shop to get all your questions answered and go over the numbers.
The above form is intended to be used for reference only, as an example of one possible Due Diligence Checklist Form. It is deemed to be reliable and complete, but is not guaranteed to be so. You should do your own due diligence, and consult qualified professionals to answer your tax, legal, financial and real estate questions.
But when it comes to Mobile Home Parks, call me, Andy Tallone at (925) 323-2134 or email me at email@example.com
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Last updated 11/11/17
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