First time posting on the forums, big fan of biggerpockets podcast, listen to it every morning at work! I'm currently going to look at my first ever deal to buy a duplex here in Rochester, NY. I am meeting with the agent on Monday and am wondering if any of you experienced duplex/multi-family investors can give me advice on what questions I should be asking, what numbers and financial statements should i want to request. This will be my first time ever doing a walk-through and meeting with an agent and I just want to know how to tell if its a good deal or not. Any tips from more experienced investors preferably in the Rochester, NY area will be much appreciated!
Both units in the home are currently occupied, ones lease expires in may and the other one has been there for around 18 years.
A little details about the deal are
- 1,380 sq ft
- 3,049 sqft lot
- Property TypeMulti-Family Home
- Last Sold $76k in 2014
- Days on Realtor.com 159 days
- Year Built1900
- Price per sqft$94
- Garage1 car
Thanks everyone in advance!
Ask if the tenants are willing to stay (instant income and don't need to find a renter). Get copies of the rental/lease agreements and study them. Look for any signs of water leaks in bathrooms and kitchens and roof.
Ask if the tenants can be there when you look at property. This will be a good way to see what the tenants are like and you can ask them if there is anything that needs repaired and/or wrong with the place.
Take a flashlight and look in the attic and under the house for signs of water damage. I like to crawl under house and check for damage in all the creepy crawling spots.
When walking through the house pay attention and try to find soft spots in the flooring especially utility rooms, bathrooms and kitchens.
Then its a matter of doing the math on what needs fixed + purchase price + all fees to be paid at closing. Then figure your monthly profit line after rent money comes in. If the profit is satisfactory to you then do it, if not move on to some other place. 20% net profit is the lowest I will go (but that's a personal choice).
In addition to what Lucas said, look for water damage around doors and windows. Open the kitchen and bathroom cupboards under the sink to check the plumbing.
Remember you are not buying this for you to live in.
General questions: how old is the roof, check if there is lead paint or asbestos (given it was built in 1900), why is the owner selling, taxes, utilities (and do the tenants pay those).
You will want copies of the lease, when you meet the tenants ask them about security deposits and rent so you can confirm that it matches what the seller gives you.
@Lucas Cochran Thank You for all the tips and actually replying to post! Wasn’t sure if I would get any replies so it’s much appreciated.
Here’s a little more of the scoop on the tenants. The first unit the tenant has been there for 18 or so years and is on a month to month agreement for some reason, she’s currently paying $850 a month and doesn’t plan on leaving. The second tenant is on a lease and it expires in May but would like to resign another lease and stay if the new landlord agrees to let her stay, she too is paying $850 a month.
The tenants both will be gone on my first showing of the house, the agent was sure that we would have to work the showing around their times, if I find it’s a good deal would I then just simply ask to meet the tenants before making an offer? How would I proceed to do so.
Again, thank you for all your advice it really helps and makes me happy to see the bigger pockets community is so friendly and helpful!
@Theresa Harris Thank you for the response! Those were all things I was thinking about as well. Great advice from the both of you. It’s funny you say you’re not going to be living there, but I did consider living in one of the units because I am still young and want to move out of my parents house. Free rent is always nice as well but if it makes more sense and only works to collect rent on both units, I don’t mind waiting another year to move out and find another deal. All I know is I don’t want to rent a place that’s for sure!
@Joseph W Deleguardia I think it’s a great location. The tenants look like they keep the place nice. My concern it that’s been on the market for almost 90 days, so it’s definitely overpriced. Another concern is off street parking. It looks like there’s a single wide driveway, so where does the other tenant park. This can be a hard area to find tenants so I would do your best to keep the current tenants in place and maybe only give them some nuisance increases (think $15 a month) when their lease is up for renewal. Remember to get An inspection of course to make sure no major game changing structural deficiencies are at hand. This part of rochester (the only part) does have some history of termites around the beach area.
@Joseph W Deleguardia If you like the place and want to put in an offer, I'd ask to meet them so you know what they are like. You will probably get an idea once you look through their units.
You could move into one of the units. Assuming you are currently paying more than $850 in rent now, you'd still save some money. IF things needed to be fixed or updated (eg painting), you could do those while you lived in the unit. Then when you move out, if the market allows for it, you could rent it for a higher price.
@Joseph W Deleguardia I actually prefer tenants to be home when I'm looking at the place. I will ask things like "everything working ok?" or "anything need fixing?" I will also ask if they like living there. I try and engage them a little bit just to get a feel for the situation and what I might be inheriting.
For your 1st deal I would absolutely do an inspection. Get your own quote on landlord insurance. Figure out your own numbers. You can verify property taxes on the city and county websites. Since it's a duplex, you'll be paying the water bill, so you can check what the most recent water bill was on the city site. For a duplex of that size I would expect a water bill around $80-$100 per quarter. Much higher than that may be indicative of a leaky toilet or faucet. Easy fixes, but over time if not addressed will cost you lots.
If it's a single furnace/hot water tank, call RG&E and get those #s. If they're separate and the tenant pays, then never mind :)
Also, with a super long term tenant, wear and tear on the unit may be significant. I just had a 19-year tenant leave, and I pretty much had to gut the place the wear and tear was so bad. That turnover was not cheap.
@Matthew Drouin Thanks for the response! Glad you mentioned the termite issue, that’s something I was unaware of. I would like to raise the rent to $900 at least on the two bedroom. I thought the property was over priced as well, what are some things I can say or do to get it for a lower price without offending the owner and what are some things I should judge to estimate what the house is truly worth?
Have your agent run sales comps and also rent comps. That must be a pretty small 2 bedroom apartment, make sure that $900 projection is on line with rent comps. If that second bedroom is super small it might be better comped to a one bedroom. In regard to negotiations on price, let your agent let you know what it might be worth and then make an offer 10% below that. If they counter you can come up a little and negotiate from there. Goodluck, looks like a great property!
@Joseph W Deleguardia Ask and get as much as you want about the deal. Understand the seller will probably have other, better, offers that don’t require as much info. So, find a good realtor who can navigate the arbitrage and find you the best deal without overpaying and you’ve found a good business partner! Trust is key on both ends. You need to trust they found something where the numbers are right and they’re trusting that you will follow through with the deal when they meet your needs.
Few qualifying questions for your agent.
How many houses has (s)he invested in?
How many clients do they serve that are investors?
How many investment properties has this agent sold this year?