10-Plex VS. 3-Plex: Main differences in the Agreement to Purchase?

[Nir]

Hi All,

I`m about to put 1 or 2 offers to purchase an apartment building or two.

Obviously, both triplex offer and apartment building offer (say 15 plex) should include a home inspection and financing condition.

However, what are some standard conditions or comments that should usually be added to an apartment building offer not included in a triplex or a duplex offer?

THANKS.
Neil

 

[Thomas Beyer]

Use a commercial real estate contract .. not a residential one. The commercial one is far more complex .. quite a big difference as it relates to:

a) deposits
b) due diligence documents
c) timelines
d) warranties
e) walk throughs
f) authority to contact city or provincial agencies (health, fire code, zoning ..)
g) liabilities if you don`t close

 

[Mike Milovick]

Hi Neil;

Amazingly, not much of a difference at all, in my opinion.

Technically, as far as the offer to purchase is concerned, the main changes will be as a result of your lender`s different requirements - this will likely include an environmental report and may include an engineering report. Your changes to your offer will be based on the additional requirements of your lender. Everything else, from a due diligence perspective, will be similar.

The OREA Commercial Sale and Purchase agreement in Ontario, is more applicable to industrial-commercial purchases - not multi-residential purchases of this size, in my opinion.

Mike

QUOTE (investmart @ Aug 12 2009, 05:17 PM) Hi All,

I`m about to put 1 or 2 offers to purchase an apartment building or two.

Obviously, both triplex offer and apartment building offer (say 15 plex) should include a home inspection and financing condition.

However, what are some standard conditions or comments that should usually be added to an apartment building offer not included in a triplex or a duplex offer?

THANKS.
Neil

 

[Nir]

Thanks Thomas, can you please elaborate a bit re: b) due diligence documents and d) warranties.
Again, just those items within b) and d) that are not usually included in residential... so tenant acknowledgements for example, you do not have to mention under b)
as they are also requested in residential offers.

 

[Nir]

QUOTE (MikeMilovick @ Aug 13 2009, 06:41 AM) Hi Neil;

Amazingly, not much of a difference at all, in my opinion.

Technically, as far as the offer to purchase is concerned, the main changes will be as a result of your lender`s different requirements - this will likely include an environmental report and may include an engineering report. Your changes to your offer will be based on the additional requirements of your lender. Everything else, from a due diligence perspective, will be similar.

The OREA Commercial Sale and Purchase agreement in Ontario, is more applicable to industrial-commercial purchases - not multi-residential purchases of this size, in my opinion.

Mike

Thank You Mike. Great input! I actually had a strong feeling that that is the case and it is really not that different fundamentally. I was a bit surprised by Thomas response making it look significantly different. that is why I just asked if Thomas can elaborate, perhaps provide some specific examples of what additional items, conditions or comments are added under b) and d) above.

 

[Thomas Beyer]

QUOTE (investmart @ Aug 13 2009, 08:02 AM) Thank You Mike. Great input! I actually had a strong feeling that that is the case and it is really not that different fundamentally. I was a bit surprised by Thomas response making it look significantly different. that is why I just asked if Thomas can elaborate, perhaps provide some specific examples of what additional items, conditions or comments are added under b) and d) above.
let`s not confuse "feelings" with reality !

One is a residential asset sold on emotions, comparables and suitablity to live in it for perhaps 20 or more years and raise kids! An apartment building, even a small 10-plex, is a COMMERCIAL property evaluated primarily on numbers.

COMMERCIAL - RESIDENTIAL !!

A big difference !

Different analysis - different asset class - different contract !

 

[Nir]

Thomas, clarification: as mentioned the question is about 3-plex VS. 10-plex. both rental but one is smaller and defined as residential by the banks as you know (up to 4 units) and the other much bigger, defined as commercial and is called "apartment building" as you know

thanks.

 

[Thomas Beyer]

QUOTE (investmart @ Aug 13 2009, 01:11 PM) Thomas, clarification: as mentioned the question is about 3-plex VS. 10-plex. both rental but one is smaller and defined as residential by the banks as you know (up to 4 units) and the other much bigger, defined as commercial and is called "apartment building" as you know

thanks.
indeed .. one is a car .. and one is a truck .. conceptually similar .. yet different license required as there are subtle, yet dangerous, possibly fatal, differences if not executed with care !