Acquiring accurate rent roll?

Question

When looking to purchase a multiunit property. How does one acquire the correct rent roll to see what the exact income and vacancy is of the property? I understand that pro forma data can be inflated to make the property look like it is receiving more income at 100% occupancy. How do I know that the seller won't make up numbers in their rent roll to make it seem that their property receives higher rents & is occupied at full? Thanks!

James Wise · Answer

Anything that is 4 units or less is considered residential. 5+ is considered commercial. If you are looking at a commercial loan you will need the schedule E's of the building to give to your lender to underwrite the loan. In commercial financing the buildings ability to support itself comes into play more so than your personal debts & income.

Some sellers know this, some do not.

In my experience the larger the building is, the more sophisticated the seller is. Sophisticated sellers know that you will need this information to get a loan and are happy to provide it. Usually they look for some commitment from you such as a contingent offer before they will turn over the taxes.

Some sellers do not seem to understand this. Again, the smaller the building the more likely you will encounter an unsophisticated seller.

Those that do not want to provide this info have likely been taking losses on their taxes and are waiting for a cash offer.

Franklin Romine · Answer

Look at getting estoppel certficates signed....if leases are really old or not in place.

Alot of running around.

Frank

Steve L. · Answer

Get copies of the leases in due diligence stage?

Eva Salas · Answer

My multi-family buyers asked for, and I provided them with, current contracts.  They also received financials for the last 2-3 years that were done by my PM.  I signed them without them asking.

Getting the current owner's wet signature on the rent roll, financials, and Sched. E (because who knows if that Sched E was actually filed...)  People think twice when their signature is on a document that says its a true and correct representation.

Jason Deutsch · Answer

Yes I'm interested in purchasing residential multi units. I am a big number cruncher. Just preparing myself and becoming educated so that I may make an offer based on what the property is actually worth & not be underwater because I was misled by inflated numbers. Honestly I don't know if I would even want to work with someone who would hide their information. Once again thanks for the insight!

James Wise · Answer

Ask them for their tax returns.

Acquiring accurate rent roll?

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