by Marc Goodin
What is a Letter of intent (LOI)?
A letter of Intent is a non-binding outline of the main points of a Buy-Sell Agreement for both parties to agree upon before preparing the actual buy sell agreement. The buyer typically is responsible for preparing the buy-sell agreement.
An LOI can be as simple or detailed as you choose. But the more details that are provided the more likely there will be no surprises or delays when the contract is reviewed by both parties. Storage Authority recommends the LOI be prepared by your attorney. Your Attorney will need info from your real estate agent and you.
Usually, the most important items for an LOI are:
· Purchase prices,
· Down payment schedule
· Due diligence time period
· Design/Approval/closing time period
· Additional time if required
· Subject to a bank loan or not If it is subject to getting a loan many buyers would like to see a pre-approval letter from your bank.
· A clause that the seller will take the property off the market while the buy-sell agreement is prepared.
Of course, there can be many more items from who holds the down payment to site-specific items as well as additional items the seller is responsible for.
We highly recommend you review the design and approval time frames with your engineer, the Town and your team to determine the LOI time frames.
You need your team in place so you not only know your site is worth the time & money to prepare an LOI and contract and to help determine the LOI time frames. In the end we eliminated the RV parking for the above site and added more Square footage including more non climate control for the above initial concept plan.
Project Timetable Worksheet for LOI & Contract
This is a preliminary overview and not all items or times are included in this summary and time frames are assumed examples for discussion purposes only and are not correct. Time frames are provided as place holders for you to confirm with your team. You must review time frames with your team, including your engineer, architect, contractor, lender, attorney, etc., and be prepared for the worst-case time frames.
This schedule assumes overlapping individual items to meet the time frames and does not include a zone change or subdivision.
Item & Days Notes
Due Diligence Period: 90 days Concept plan by Engineer reviewed with the town,
Borings & Geotech report, phase 1 completed, Survey &
Civil site plan contracts design in progress
Approval Period: 360 days
Boundary, topo, wetland Plan 1 + months
Site Plan Design and related applications 3-4 months
Site & related approvals 3-4 months
Building design 3-4 months
Bidding/contract/bldg. permit 3 -4 months
SBA Loan 3 months
The 360 days assumes the faster time frames and that multiple items are done at the same time. The building design and banking are started early in the site plan design. And site plan design and building design contracts are signed the week after the buy-sell contract is signed by both parties.
It is critical to review timing with the Town and your engineer before the LOI is completed. Some Cities can approve plans in 2 months others take a year or longer to review and approval.
Contract Extension: 2- 60-day periods
Total months assume average or swift time frames in many communities. (not worst-case time frames) And overlapping from one process to the next.
Get more information on Storage Authority Franchise at www.storageauthorityfranchise.com/opportunity3
If you want a copy of a simple LOI email me at Marc@storageauthority.com
Marc Goodin is President of Storage Authority Franchising. He owns 3 self storages he designed, built and manages. He has been helping others in the self storage industry for over 25 years. He can be reached at marc@StorageAuthority.com or directly at 860-830-6764 to answer your franchising, development, marketing, sales and operations questions. His best selling self storage books are available at amazon.