I just entered into escrow with a 4 plex. This is my first multi-family property. Besides doing inspections....what else should I look at? Can I ask for the prior years expenses or the tax returns? I have estimated everything on my end so far & checked the tax records, etc, but I woudl definatley like to know the real values. Any advice would be appreciated!
@Steve Triano Sure, you can ask. If it’s a third party PM you’ll get a nice PDF of detailed expenses. If it’s a mom and pop you (typically) get either a Quickbooks export, an Excel sheet, or an email listing everything. So you run into data quality issues and even with “high quality data” you shouldn’t be surprised when a mom and pop owner run certain expenses through the business. One “package” of homes I’m looking at right now has $2,500 per year in phone expenses. There are no phones. Now does the owner run their cell phones through the business? Maybe, I don’t know. I just know I wouldn’t have those costs. But just asking for a tax return with might just be confusing if there isn’t a breakdown.
You can ask for anything you can think of. If they refuse you then decide if you wish to take the risk of continuing or dropping out of the sale. Obviously you need to put your due diligence request list as conditions of your offer.
If it is after the fact you can only hope they accommodate.
Be sure you’re getting estoppel letters signed by each tenant indicating their current rent and security deposit along with leases.
The security deposits should be paid to you at closing.
Thank you guys! I've got my realtor getting the Estoppel letters and expenses.
@Steve Triano yes. It is called due diligence and if they do not provide you/your lender with the information needed during the due diligence period, you should be able to walk away depending on how your contract is written.
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