In this conversation, Tanh delves into the critical role of rent rolls in the due diligence process for property investment. He emphasizes the importance of understanding tenant specifics, lease expiration trends, and market comparisons to make informed investment decisions. The discussion highlights the need for thorough analysis to identify potential risks and opportunities, ensuring that investors are well-prepared before finalizing any property deals.

Takeaways

1. The rent roll is essential for understanding income streams.

2. Staggered lease expirations provide more stability.

3. Identifying value-add opportunities can boost income.

4. Market comparisons are crucial for evaluating rent rates.

5. Understanding tenant longevity helps predict lease renewals.

6. Check for discrepancies in rent roll and income statements.

7. Document uncertainties to address with brokers or owners.

8. Stay vigilant for reasons not to buy a property.

9. Know what the numbers mean before signing anything.

Chapters

00:00 Understanding Rent Rolls: The Foundation of Due Diligence

02:45 Analyzing Lease Expiration Trends for Stability

05:23 Evaluating Tenant Mix and Market Rent Rates

07:13 The Importance of Lease Terms and Vacancy Rates

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The cash flow statement is a financial roadmap that shows how money moves in and out of a business. It is split into three main parts: cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities. Each part tells a different story about where the money is coming from and where it's going. Cash flow is different from profit, as cash flow tracks the movement of money while profit is what's left after deducting expenses from revenue. Understanding financial documents like the cash flow statement, balance sheet, and income statement is crucial for understanding a company's financial health.

Takeaways

• The cash flow statement shows how money moves in and out of a business.
• It is split into three main parts: operating activities, investing activities, and financing activities.
• Cash flow is different from profit, as cash flow tracks the movement of money while profit is what's left after deducting expenses from revenue.
• Understanding financial documents like the cash flow statement, balance sheet, and income statement is crucial for understanding a company's financial health.

Chapters

00:00 Understanding Cash Flow Statements

00:56 The Three Parts of a Cash Flow Statement

03:50 Cash Flow vs Profit: What's the Difference?05:12 Analyzing Financial Health: Connecting the Dots

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The income statement, also known as the profit and loss statement, provides insights into a company's financials and trends over time. It summarizes the revenue, expenses, gains, and losses over a specific period. The revenue section shows the total amount of money earned, while the expenses section includes costs incurred to generate revenue, such as costs of goods sold and operating expenses. Other sections may include marketing expenses, general and administrative expenses, net income, and depreciation. Understanding the income statement is crucial for assessing a company's performance, profitability, and financial trends.

Takeaways

Chapters

00:00 Introduction to the Income Statement

01:40 Revenue, Expenses, and Net Income

03:23 Analyzing Marketing and Operating Expenses

04:49 EBITDA: A Measure of Operational Performance

06:24 Financial Trends and Predicting the Future

07:19 Conclusion

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Underwriting is the process of analyzing financial data to assess the investment and financial risk. It is important to independently verify information provided by real estate brokers. Being a good underwriter is crucial to making profitable investments. Underwriting involves analyzing financial statements, starting with the balance sheet. The balance sheet provides a snapshot of a company's financial standing, including assets, liabilities, and shareholders' equity. It helps determine the company's book value and financial strength. Assets are tangible and intangible items owned by the company, liabilities are obligations owed to others, and shareholders' equity represents the shareholders' investment in the business. The balance sheet is just a snapshot and should be analyzed in conjunction with income statements and cash flow statements for a comprehensive understanding of a company's financial journey.

Takeaways

Chapters

00:00 Introduction to Underwriting

02:38 Understanding Balance Sheets

04:08 Components of a Balance Sheet

05:57 The Importance of Financial Statements

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In this episode, Tanh discusses two important aspects of the due diligence phase: attorney lease reviews and preliminary title reports. For lease reviews, it is crucial to understand the relationship between the landlord and tenants, as well as any sneaky clauses that could cause issues. Preliminary title reports reveal ownership, liens, easements, and encroachments on the property. It is important to address any issues uncovered in the report as soon as possible. The speaker also touches on financing and negotiations during the due diligence phase.

Takeaways

Chapters

00:00 Attorney Lease Reviews

02:31 Preliminary Title Reports

04:38 Financing and Third-Party Reports

06:18 Negotiating Based on Due Diligence Findings

10:39 Closing Tips for a Successful Real Estate Deal

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In this conversation, Tanh discusses the due diligence process in real estate investing. They emphasize the importance of starting the due diligence period immediately after signing the purchase and sale agreement (PSA) and acquiring all requested documents. The speaker provides tips on depositing earnest money, using a trusted title company, and reviewing financials, leases, and expenses. They also discuss the importance of conducting site visits, checking the neighborhood, and analyzing competition. The speaker advises conducting a financial audit and being meticulous throughout the due diligence process.

Takeaways

Chapters

00:00 Navigating the Due Diligence Period

02:36 Reviewing Financials and Leases

07:02 Examining Bills and Service Contracts

09:24 Assessing the Physical Aspects of the Property

13:39 Conducting a Site Visit and Analyzing the Neighborhood

16:35 Analyzing Rent Comps and Competition

19:54 Performing a Financial Document Audit

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After getting the Purchase and Sale Agreement (PSA) signed, the due diligence phase begins. The first step is to create an escrow timeline, which outlines all the events and deadlines throughout the transaction. Important dates in the timeline include the due diligence start date, appraisal deadline, deadline for environmental reports, property inspection deadline, and financing contingency deadlines. Estoppels, which certify lease terms with each tenant, should be taken care of early on. During due diligence, it is crucial to review the estoppels for lease rates, rentable square footage, rent payments, common area charges, defaults, unfinished work, lease extensions, and purchase options. Being organized and following the escrow timeline is essential to not miss any dates or deadlines.

Takeaways

Chapters

00:00 Introduction to the Due Diligence Phase

01:03 Creating an Escrow Timeline

04:13 Preparing Estoppels

06:12 Reviewing Estoppels

07:32 Key Takeaways and Conclusion

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It’s official, y’all—I’m stepping into the world of authorship! In this episode, I’m beyond excited to announce the release of my very first book, Value Over Volume: The Foundation of Commercial Real Estate Investing. This is the first of a three-part series where I’m breaking down the game of commercial real estate like never before.

I’m sharing the mindset, strategies, and principles that have helped me build wealth and create opportunities in this space. Whether you’re a seasoned investor or just curious about how to get started, this book is your blueprint to understanding the why and how of building a solid foundation in CRE.

Tune in as I give you a sneak peek into the book, the inspiration behind it, and why this series is going to change the way you think about real estate investing.

Here's the link to my book: Value Over Volume

Want to learn more about CRE? 


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Pre-due diligence is the phase before entering into due diligence when acquiring a property. It involves thoroughly examining the property's health, financial background, zoning rules, environmental factors, and more to identify any red flags and determine the property's true value. On-market properties come with an Offering Memorandum (OM) that highlights the positives, while off-market properties require more research and digging. Google Maps is a useful tool for virtual walk-throughs of the area. Demographic data, crime rates, school quality, and business reputations are important factors to consider. The due diligence period in the purchase agreement should allow enough time for thorough investigation, and extensions should be included. Researching the seller can provide leverage in negotiations.

Takeaways

Chapters

00:00 Introduction to Pre-Due Diligence

01:37 Differentiating On Market and Off Market Properties

02:41 Key Factors to Consider in Property Analysis

05:23 Submitting an LOI and Moving to the PSA

13:33 Navigating the Due Diligence Period

15:45 Ensuring Transparency and Communication

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In this conversation, Tanh discusses various documents that are important in the closing process of a real estate transaction. The documents include closing statements, deeds of trust, deeds, assignment contracts, affidavits, amendments, and memorandums. The speaker explains the purpose and key details of each document, highlighting their significance in the transaction.

Takeaways

Chapters

00:00 Introduction to Crucial Documents

02:20 Deeds of Trust

04:34 Assignment Contracts

06:09 Affidavits

07:40 Memorandums

08:23 Conclusion

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