1) Hire a Real Estate attorney and make sure that the tenant can’t cancel the lease and they would be responsible for paying the rent if they assign or sublet. In addition, pay special attention to the assignment clause of the lease agreement and make sure that the tenant can’t assign to a smaller tenant and if they are allowed under the lease, they will remain liable for the rent payments.
2) Review the lease and be sure that the tenant is responsible for the roof and structure in addition to the tax, insurance and the common area maintenance.
3) Make sure that the tenant’s guarantee is good and it will be transferred at the time of closing. Review tenant’s financials, credit ratings, store sales, earnings before tax (EBT) and be sure the rent to sales ratio is healthy.
4) Review the phase 1 report. It is important to ensure that the site is environment-friendly and free from hazardous materials. If phase 1 report suggests phase 2 report, it’s very Important to get the phase 2 report done and make sure there are “no further action required” language in phase 2 report.
5) Review the Title Insurance Policy and make sure the seller is the same seller who owns the property and the same name is on the lease .Review the easements and exceptions on the title and that the title is clean.
6) Review the “Alta Survey” and make sure there are no encroachments on the property and also if there are any easements, they are to the advantage of the property owner and not to the disadvantage.
7) Review the tenant’s Insurance Certificate and request the buyer’s name to be added to the tenant’s insurance as additional insured before the closing.
8) Review the “Certificate of the Occupancy” and be sure there are no violations on the property and that the property is not under any city future development project through the zoning office.
9) Inspect the building structure and the roof and make sure the building is structurally solid and the roof does not have any leaks as well as the property is well taken care of.
10) Make sure to get the assignment of the lease as well as the “Estoppel Agreement” before going to the final step, which is the property closing.
To find out more about how to invest wisely from NNN deals, please contact our highly experienced associates at Triple Net Investment Group- a leading Commercial Real Estate Investment Firm.