Contract to closure of a fourplex

6 Replies

Hello Members,

I am in a contract to buy a fourplex in north Texas region and option date start from tomorrow. This is my first investment and want to make sure I do it right.

I need fellow members advice on :

1. What all documents I need to check before option period expires?

2. Can somebody help me pitfalls and do and don't during each step of the process.? I have done some homework but it would be great if i can hear from expert. I know my homework definitely would fall short compare to the knowledge base of this forum.

3. Is there some cost which buyer agent bears that I should keep in mind ?


Thanks for taking time to help me with this. Looking forward to some great insights.

I will post my experience and deal details once i close the deal. 


-Anant

Hi @Anant Garg ,

First and foremost, make sure the financials of the deal work in your favor.

1. Look over any inspections or seller's disclosure documents. That should reveal any known issues with the property.

2. Don't look at properties that you are unable to purchase, whether with or without financing. Make sure your lender will fund your deal before you send any funds to the seller, like earnest money.

3. The costs will be outlined i the purchase agreement, but often (in Minnesota) the agent commissions will be added into the purchase agreement so the buyer doesn't pay anything upfront. For example, a $100k property and buyer's agent is charging 3% ($3,000), the buyer offers to pay the seller $103k and then have the seller pay the agent commissions.

Nathan Platter

    This is probably obvious but get an inspection. Ask around other investors locally to find out who they use, there is a wide variety in quality. You can negotiate repairs either before closing or as a reduction in the purchase price, but only if you know what needs work. Pad your own budget for repairs you will need to do right after you buy.

    I responded in line within your quoted text.

    Originally posted by @Anant Garg :

    Hello Members,

    I am in a contract to buy a fourplex in north Texas region and option date start from tomorrow. This is my first investment and want to make sure I do it right.

    I need fellow members advice on :

    1. What all documents I need to check before option period expires?

    I would for sure want a copy of all leases, have an inspection (if you can get your contractor to meet you at the end to bid out work that is great), and make sure your title company has time to make sure there are no delinquent assessments or taxes (your PA may have the sellers responsible for this, but I don't know what are on the forms out there).  Secret bonus inspection points go to having the sewer line scoped as this is a blind spot for most investors.

    2. Can somebody help me pitfalls and do and don't during each step of the process.? I have done some homework but it would be great if i can hear from expert. I know my homework definitely would fall short compare to the knowledge base of this forum.

    The biggest pitfall comes from not understanding your market and not having an exit strategy.  If you can get long term fixed financing in a deal that cashflows, having an exit strategy becomes less important, but I would always want to know I am walking into equity and have some liquidity in the asset if it comes down to it.  If you understand market conditions and you have a strong market, you won't get caught up on small items and will be able to look objectively at the deal's value.

    I will also add in your ability to estimate costs accurately. Proper budgeting can show you that what you thought was a 10 cap is actually a 6 cap. Capex, management, tenant placement, insurance, taxes, VACANCY and repairs can eat up a lot of profit.

    3. Is there some cost which buyer agent bears that I should keep in mind ?

    Use an agent, especially on your first deal.  I am not entirely sure what you are asking, but if it is not already built in the price you can do what has already been mentioned.  You will get a lot of value out of this if your agent understands points 1 and 2.

    Thanks for taking time to help me with this. Looking forward to some great insights.

    I will post my experience and deal details once i close the deal. 

    Originally posted by @Ronald Rohde :

    Have you asked your Buyer's agent or attorney? these seem like fairly standard due diligence items.

    I would have to agree with the attorney on this.  A competent title attorney with your closing (escrow, title, closing) company should be able to advise you on the structure & legalities of your deal.  Maybe you are already aware of this but I know a lot of new investors are not, you can have any Title company you prefer.  You don't have to use the same as the seller or your RE agent's buddy.  The couple hundred bucks it might cost you is well worth it.  I hope all goes well for you and your deal!

    Thanks everybody taking time to help me on this. I am in contract right now and working out on finances to close the deal.  These are the documents I asked from the seller although he couldn't provide many. :

    1. rent Roll.

    2. P&L statement and Expense Report

    3. Bank statement reflecting rent deposit.

    4. Copy of Leases.

    Thanks again for jumping on this thread and helping me out on this. After the deal closes, I will share my experience and learnings.

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