Hi everyone! I am actively looking and in contact with a couple different sellers. The two properties I have my eye on are cash-flowing properties, which is very attractive to me. I have never purchased a "cash-flow" property with tenants already in place. My question is, how do I verify that they are cash-flowing? Do I request a copy of a lease? But then, anyone can make a lease and tenants, so how do I actually verify these things? Do I request bank statements from the current owner? All help and advice is greatly appreciated! Thank you!
While some people think it may be invasive I would ask for bank statement before actually closing. I would also check local rents around to see if it's comparable with the annual rent they claim to be getting.
A great example: I was looking at a 3 family house that had completely been gutted. It looks amazing and they claim the annual rent is 50k a year. Come to find out it's not a 'true' 3 family (looked info up on assessor office) and they have no income statements to prove it because it has just been redone and they don't have tenants yet (no way to prove you can get 50k).
My point is- if they are seriously getting the rent they advertise they're should be no hesitation to show you a copy of a bank statement. Any other cash management systems can be faked (venmo, pay pal, ect.)
I actually contacted the tenants before purchasing my current property to double check.
I hope this helps.
@Michael Doherty Thanks for the feedback! Greatly appreciated! That's pretty much what I was thinking I had to do...but I didn't know if it was too invasive, or would come off as being rude, but I think it would be naive not to. Thanks, again!
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