5-plex buying guidance

[Evan Steadman]

Hi all. I am a newbie from West Virginia and have found a multifamily that I think would be worth buying, but I am not really sure what questions to ask the seller and what actions to take prior to purchase that would help me make an educated purchase.

I am looking at a 5 apartment (6 bedroom) multi with an asking price of $129K. I have already asked the seller for current rental rates and average occupancy rate. (seller says this property has been 100% occupied since taking ownership 10 years ago) 

What other kinds of questions should I ask? What kind of actions should I take (inspections?,... appraisal?) prior to purchase? Anyone with experience in buying multis, please let know your thoughts. Thanks so much for sharing!

[Tim Walker]

First thing is that he's already lied to you, possibly an "honest mistake / miscommunication" possibly with intent to deceive.  So you need to review everything very closely from here out (which you should do anyways)

He has not had 100% occupancy for 10 yrs.  Period.  It's statistically impossible for him to have zero turnover or to have zero time between tenants upon turnover.

Now then. I started buying multi's about 18 months ago and am 3/6 for deals going through.  What I ask for is three years of revenues and expenses (backed up by tax returns), full property disclosure, history of repairs for time of ownership, and copies of current leases.

Definitely do the inspection, if you have a realtor ask them what you should specifically have inspected in your area, if you don't have a realtor ask your inspector. I interviewed a few inspectors and used two before I found a guy who gets all my future business.

If you're getting it financed the bank will want their own appraisal, and you'll be paying for that anyways so don't pay for it twice.  If you aren't using financing ask your realtor for comps.

Get insurance quotes before you make an offer.

Verify taxes on the county auditor's site.  

Call the utility companies and verify the average bills you will be paying.

Figure out lawn care and snow removal before you buy so it's not an issue after you buy.

Ask the seller for all of his business contacts for the building - if he doesn't have any, it's probably a bad sign.

Hope this random rambling helps.