New to Multi-family
Hey BP community,
I'm new to multifamily investing and currently analyzing my first 5/6-unit property. I want to make sure I'm approaching due diligence correctly before making an offer. I have only done single family homes so far, so this is new to me.
My question: Is it standard practice to request a trailing 12-month rent roll and detailed financial documentation — utility bills, expense history, lease agreements, and repair receipts — from the listing agent before making an offer? I ask because so far I've been unable to get complete information from listing agents on the properties I've been looking at. Is this typical in this space?
Specifically:
- Should I expect this information before making an offer, or only after an accepted offer during the inspection period?
- For those experienced in 5+ unit deals — do you underwrite based on the current in-place rent roll or the pro-forma?
Thanks in advance. This community has been incredibly helpful.
Most Popular Reply
@Mary Pastoral — good answers above on the T12 and rent roll. Here's the layer most new investors miss on 5-6 unit deals.
Before you even request documents, ask the broker one question: "Is the owner self-managing or using a PM company?" That answer changes everything about how you read the financials.
Self-managed owners almost always underreport expenses. They don't track their own time, they pay handymen in cash, and their "maintenance" line is missing half the real cost. Budget 8-12% higher on operating expenses than whatever their T12 shows.
Documents nobody mentioned that you need:
1. Insurance loss runs (5 years). Call the agent directly if you have to. Claims history tells you what the building actually went through — water damage, liability incidents, break-ins. The seller won't volunteer this.
2. Utility bills (12 months), not a summary — the actual bills. You need to know who's paying what. If the owner is paying all utilities on a 5-unit, that's $800-1,200/month in many markets that's eating your cash flow. RUBS (ratio utility billing) can recover 60-80% of that, but you need to know the baseline first.
3. Property tax bill + assessment history. In most states, the property gets reassessed at sale. That $4,200/year tax bill on the seller's T12? It might be $7,500 after you close. Run the numbers at the reassessed value, not the current one.
4. The lease agreements themselves — not just the rent roll. Rent roll tells you what they're paying. The leases tell you what happens when they leave. Month-to-month tenants in a 5-unit means you could be staring at 60% vacancy in 90 days. Fixed-term leases with staggered expirations are what you want to see.
The real question at 5-6 units: You're right at the line where residential financing ends and commercial begins. Some lenders will do conventional up to 4, some portfolio lenders go to
10. Your financing options drive your underwriting assumptions — get pre-qualified before you fall in love with a deal.
Good luck with it. The fact that you're asking these questions before making an offer puts you ahead of most first-time buyers.