Do certain finances transfer over on purchase?

Question

Extremely new to real estate investing. Currently analyzing a small multifamily (6 units). If my partner and I purchase the complex, do any finances with the complex transfer over to us? For example, if tenant #1 paid their security deposit does that remain so it can be refunded when their lease expires? If the property managers have been properly building a financial reserve for CapEx and Emergencies, do those transfer over?

Denise Supplee · Answer

Hi @Kenneth Kirkland, When you buy a property, the assets transfer but money like security deposits or reserve funds doesn’t automatically. Security deposits need to be handed over or credited at closing so you can refund them later. Reserve accounts for repairs or emergencies usually stay with the seller unless you negotiate otherwise. Make sure your purchase agreement clearly states you’re getting deposits, any prorated rent, and any reserves you want included. Your closing team will check, but it’s on you to confirm it’s in writing.

Juan Yepes · Answer

Hi Kenneth,

I hope this helps. If you'd like to discuss further feel free to DM.

1. Security deposits and prepaid rentsThese do transfer because you inherit the obligation to refund them in the future.You should receive a buyer credit at closing for the full amount of: security deposits, last-month’s rent (if collected), any other tenant-held balances

Example:If the seller is holding $10,000 in deposits, you should receive a $10,000 credit so you’re made whole when tenants eventually move out.

2. Operating reserves / CapEx reservesIf the seller has built up their own internal reserves, these typically do NOT transfer.Those are the seller’s savings for future expenses that will no longer be their responsibility after the sale.

The exception:If you are assuming a loan with lender-held escrow reserves (common with agency loans), those lender escrows may transfer with the loan.

Otherwise, plan to fund your own reserves after closing.

Hope that helps!

Kenneth Kirkland · Answer

@Denise Supplee thank you! Very helpful. Definitely a topic not covered in any books I've read.