What is an LOI in Real Estate? Is an LOI binding or non-binding? What’s in a letter of intent (LOI)? Why is this document SO important?
This video will walk you through an (LOI) letter of intent, in relation to multifamily real estate.
What is LOI in real estate?
LOI is a real estate acronym that you may come across within the commercial real estate industry. In Real Estate the LOI stands for the “Letter of Intent”.
Commercial real estate investors use an LOI when making an offer on a real estate property.
The purpose of writing a real estate LOI is not only to let the asset owner know that you are interested with the property, but to let it be a bridge to let the owner know what you can offer without having to state every detail of the transaction.
A letter of intent (LOI) can be as simple as a single to a 2-page document.
In real estate, the LOI does not have to contain all of the details of the transaction. This will be discussed within your purchase and sale agreement (PSA).
Real estate LOI’s are not legally binding contracts. Some advantages of using LOI, and why successful investors use it, is that you can’t be bound and allowing you to make offers on properties without any hindrances.
You can show your interest within a letter of intent to multiple properties without a huge cash outlay.
If you increase the frequency of your LOI’s submissions this will improve your chance of getting more deals under contract!
We hope this article provided you clarity on the letter of intent and how it is used in real estate.
If you are interested in multifamily investing please visit Disrupt Equity’s investment page here. On this page, you can go through our investor’s Frequently Asked Questions as well as submit a form to be notified of our upcoming investment opportunities!
Braden is a passive investor in multifamily real estate!
Braden has been looking to invest in another multifamily property, so he calls his sponsor Sandy to ask if there are any investment opportunities available!
Sandy tells Braden that she has actively been searching for the right deal and has submitted 30 LOI’s in the past week!
Braden asks what an LOI is?
Sandy explains that an LOI is an abbreviation for a Letter of intent, which is the 1st formal step between the property owner and buyer to negotiate the terms of a commercial real estate transaction. Sandy describes that when she submits an LOI to an owner of a property it shows the owner her genuine interest in purchasing that property!
Braden asks what all is in an LOI for a real estate transaction?
Sandy explains that this no-binding proposal would contain many details including the key deal terms discussing potential purchase price, the Earnest Money Deposit, the due diligence period, insurance, closing conditions, and much more! Sandy explains that she excited for many of the LOI’s she has submitted and is ready to provide more deals for her investors!
Braden is thankful to Sandy for breaking down the LOI proposal and is excited for her next investment opportunity!