Shortsale Fourplex and Due Diligence Hinderances

[Sean H.]

Hi Guys,

Long time listener of the podcasts and have been reading more and more of the forum lately. I have a question for you guys that I haven’t been able to find in the forum search.

I have a fourplex property I am under contract with. It is a shortsale, and the seller has more than $130,000 in default payments on an $800,000 mortgage taken out in 2006. The property will be delivered vacant, as the current tenants are not paying rent.

My issue is that it appears the owners have not been receiving rents, so when I am going through my due diligence checklist there are many items that they will not have. Rent roll will be non-existent or incomplete, operating expenses will not be accurate, I doubt we can even get tax returns or copies of insurance policies (if they exist). So essentially I won't have a verifiable source to get real property data on rents and expenses.

So my question is when you’re dealing with a shortsale multifamily that has just been left to die by the current owner, how do you go about getting the typical due diligence items? Is the only way to be successful is to get the property at a price so low that you can be off by 10-20% with your estimating numbers? My plan is to use market rents and discount it by about 10% to determine my market rent and GOI.  

Anyone with experience in this or with any advice would be greatly appreciated!

Thank you!