Hello, BP crowd!
I have a question when it comes to what your real estate agent should be providing. My husband and I are on the hunt for our first rental, most likely 2-8 units. When I ask for financials, sometimes I get a great breakdown, sometimes I'm lucky to get income for the year and a line item for all expenses. I realize that my realtor is forwarding information from the listing agent, but can they/should they dig for more? Would it help if I were to create a spreadsheet with income and expenses itemized and they can fill it in, maybe push the listing agent for more details?
I don't want to demand more than I should, but I don't see how I can make accurate decisions with so little information. Your input is greatly appreciated! Thanks!
They can only provide whats given to them. If you're looking at buying small multifamily, the reality is you will not get accurate or complete financial information. And nor do you really need it.
@Valerie Post Hi. Once I have a multi I am interested in I typically ask my Realtor to try to get me the “paperwork” on the property, whatever that might be while at the same time setting up an appointment to go view it.
Depending on what it is I usually try to take my contractor with me to the showing. This way he can immediately begin looking for repairs or help me rule out a property if there’s something grossly wrong with it. And there have been quite a few that he’s said No to for various reasons.
I use the BP calculator with the information in the “paperwork” to run initial assessments and if I don’t have certain numbers I estimate them based on my other properties or opinions from my contractor. Sometimes we outsource and bring in project specific bids.
Then if my numbers work and I still feel the ARV works I make an offer. I never feel bad about asking my realtor to do a little extra work. My market is fairly small and I'm not a tire kicker he knows I buy and sell with him traditionally so while my commissions might not be the biggest they are steady.
Unfortunately, the answer depends a little on what you are buying. Traditionally, 2-4 units fall under conventional lending standards. This means that the appraisal is mostly done on a market based approach, i.e. what are other similar units selling for. However, 5+ units are a commercial loan that usually offer worse terms for you loan. The advantage is that income drives the value. Either way, I would say do your own research. Presumable you are buying a property because you think you can do better than the last guy unless you are looking at a turnkey. The current market is extremely competitive and most properties (depending on you area) do not have very much room for cash flow at the current rent rates. Again, this depends on the type of property you are buying and your strategy but the most important question is can you make money on the deal. If your numbers are conservative and accurate, who cares what the sellers were doing with it.
I am no expert, but if you want I can take a stab at your deals and numbers. LMK
@Valerie Post . They can only give you what the seller / listing agent provide. As a buyers agent I ask all the time for additional information, sometimes I get it other times I do not.
I also dig deep for comps old listings anything o can find big ultimate you as the investor must underwrite your own deals - it is not the role ( in my opinion) to fill out a buyers spreadsheet. That is their role and as such require that from all my clients. You must understand the numbers so when you see a good deal you it makes sense.
Also 5+ is a completely different game including the underwriting. There are a lot of lazy sellers out there right now with huge expectations.
Wow...a big thank you to each of you for helping answer my questions! This is why I truly appreciate this forum. I am so worried that I am not going to do my due diligence and run the numbers accurately to make sure I pay the right price for a property. Any suggestions are greatly appreciated and I will definitely move forward with everything that was suggested. Thank you all!
Thank you, Alicia! You had some great input, especially about taking a contractor with you when you look at properties. I'm sure, like they say, the first purchase is the hardest and it will get much easier once we establish our network, people know we are serious, and we get used to looking at numbers. I would welcome any additional advice you have for me! Thanks so much!