This mantra has been around for years. I will always remember the quality-speed-price scenario being applied to the printing business. It’s a real pickle, isn’t it? You are wanting some high quality business cards to represent your business. You need them now and at a good price. What is the probability of getting quality, speed and price all on the same day? Pretty low. So how do you select the two?
In multifamily acquisitions once a strike price is reached the clock starts ticking on the due diligence phase. No matter if the deal requires a “quick closing” or is slow and involved, either way presents a limited amount of time to perform all the necessary steps to reach closing day on a date certain.
Quality. Sometimes it’s OK to lower quality standards. Like buying an ice cream cone. Good or bad once eaten you can choose a different flavor or vendor next time. In real estate due diligence that luxury is unacceptable. With respect to title work, for example, there is never a reason to cut corners.
Speed. Speed can be accomplished with preparedness. Your services providers must be aligned prior to having the contract signed. Legal, title, mortgage financing, environmental, property management. All of these companies (service providers) should be ready to do their part (and obligated) on the very first day of the due diligence period. Otherwise, you are already behind.
Price. For legal work, as an example, we need competent counsel. Granted, every deal isn’t in need of a $500 an hour real estate attorney. However, that’s no reason to use an ambulance chaser on your eight million dollar deal. Common sense must prevail. There is often a correlation between price and experience. And based on the complexity of commercial transactions YOUR transaction is no place to let a new kid practice their craft; no matter the craft. Yes, it’s perfectly fine having junior members on the team but they must be directly supervised by the old heads that have been on this path five hundred times before.
When it comes to the choice of “pick any two” my advice is to avoid this perspective to the best of your ability. A quality multifamily acquisition is a long-term investment with a high dollar value. Short-changing the due diligence process leaves you without defense if the items that went without review pre-closing are brought to light post-closing… all for the sake of saving a buck. It can be a very expensive dollar saved, indeed.
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Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. http://www.MultifamilyInsight.com