Full Cycle Acquisition Process
What are the various phases of a full cycle acquisition process? At Peak 15 Capital, we think of our assets as progressing through seven distinct phases, which together make up the acquisition process. Both new and seasoned investors can benefit from a clear understanding of the process, as each phase is characterized by unique objectives, risks, and rewards.
We’ll walk through a typical acquisition process, covering the offer, best an final, LOI, PSA, due dilly period, closing period, and post closing period phases. With this information, you can better identify the risk-return profile and phase in an full acquisition cycle that most closely aligns with your goals.
#1 The Offer
Period for initial offers on asset lasting 2-3 weeks, underwrite deal well and stress test.
#2 Best & Final
Presenting best price, sharpening the underwriting and stress test again based on final price presented - 1-2 weeks.
Letter of Intent is not a legal enforceable contract. - chance to put in language that would go in the PSA - 1 week time.
The final legal document that will bind parties to the deal - Time to sing PSA could be stretched to as long as 3-4 weeks from LOI signing. - Stress the deal again and align debt providers with a term sheet and speak to early potential investors
#5 Due Dilly Period
- Full inspection of units - Inspect every single unit
- Earnest money deposit is paid to escrow Capital vetting -Time to get to work on debt with debt provider you selected. Start providing documents related to deal and sponsors. Also pay lender application and agency debt fees if applicable.
- Select a property manager
- Form correct entities for the deal and open bank accounts
- Investor vetting - start to conduct investor pre- sensations and meetings about the deal
#6 Closing Period
- Rounding all investors and maybe doing a second investor presentation.
- Following up on debt providers and making sure they have what they need
- Revisit the underwriting one more time and come up with a solid business plan for the rehab and property manager to execute
#7 Post Closing Period
- Visit property to onboard the new staff
- Make sure you got what you paid for
- Start the business plan execution