Looking at First Multi-Family deal, what am i missing

Looking at First Multi-Family deal, what am i missing

Dawn RoofPro Member
Rental Property Investor · Charlotte, NC · Member since 2014 · 24 posts · 6 votes

I'm new-ish to REI, with one single family home purchased last spring so far. That has gone very well, and we are looking at stepping up the game to a Multi Family. The one I have my eye on is 6 units (two triplexes next to each other) (4) 2 bed/1 bath, and (2) 3 bed, 1 bath, and based on all of the numbers I have run (multiple, multiple times) it looks AMAZING on paper. My main question, is how can you verify the numbers that the seller is giving you? I'm so afraid that they are incorrect, or just plain lies. This is a huge investment for us, and I don't want to make a terrible mistake. Another factor is that it's in a not so great neighborhood, but that has signs of revitalization going on. How do you guys make sure the numbers you are working with in terms of rent roll, and operating costs are good??? The seller has said that it's 100% occupied, and has been, but can't give me a history because they have only owned it since Nov of 2015 (they are flipping it; Did some repairs, and raised all of the rents significantly.)

I still have not seen the inside of the units, because we can't get in until an offer is accepted, but it's hard to make an offer, when you can't see what you are buying, and have to take the word of the seller at face value.  Any advice, on how you move forward, and how you verify the numbers would be greatly appreciated!!

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Real Estate Investor · Chicago, IL · Member since 2014 · 286 posts · 159 votes
10y

Well, that is one way to verify rents is by seeing a property. If they are saying rent for 2f is $1200 and it's a gross dump, you can bet they aren't getting that. Also, how the tenants act toward you is key.  I find not getting into any apartments at all is ridiculous and it's a red flag. 

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  • Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Erik Sherburne:

    Just a quick note to everyone on this thread.  There is a lot of amazing of advice in these series of posts.  Info that could fill a book or two.  Thanks to all who contributed. .

     Ditto.

  • Hard Money Lender · Sea Girt, NJ · Member since 2012 · 125 posts · 37 votes
    10y

    It's not the best sign that the seller won't let you into a unit. Howeber, that doesn't necessarily mean anything. Regarding verifying the numbers, that's what did diligence before. 30 days should be plenty to verify all the lease and expenses. You'll be asking for the leases arrears report, and bills to make sure the numbers are correct. 

  • Investor · Wasilla, AK · Member since 2016 · 277 posts · 139 votes
    10y

    Thanks for all the advice on this post.  I'd dealing with the exact same issue (detatched  7 plex).  Having a hard time verifying the rent and expenses since any document provided by the seller is suspect or known to have been altered.  Also, rents have been raised in the last couple months, so... am I  going to be faced with vacancies as soon as I get it?

    Great fun... other than the loosing sleep and money part.

    Keep us updated

  • Dawn RoofPro Member
    OP
    Rental Property Investor · Charlotte, NC · Member since 2014 · 24 posts · 6 votes
    10y
    Originally posted by @Keith N.:

    @Dawn Roof I would be very skeptical about this deal considering A) they won't let you into the house until an "offer is accepted" and B) they won't attempt to provide you with any sort of rental history.  It could still be a great deal, but you should do extra homework.

     @Keith Nelson It seems to be pretty normal in the Charlotte area to not allow anyone in until after an offer is accepted. I see it mentioned in the listings all the time. The lack of rental history was strange, but the seller never really said no you can't have it, just that it wasn't available. I'm wondering if they just wanted to keep that info private until an offer was on the table. Either way, we waited too long, (which is strange too, because it was on the market for over 100 days) because with in 3-4 days of me finding the deal, it was under contract with another person. *sigh* If only we had acted sooner!

  • Curtis WatersBusiness Member
    Rental Property Investor · Charlotte, NC · Member since 2013 · 292 posts · 176 votes
    10y

    Dawn,

    The Charlotte market has so much investor interest recently.  I have seen requests daily to show multi-family properties, and had to require prospective buyers to show real intent before disturbing tenants with showings.

    I have fix & fliped rental properties in metro Charlotte.  These properties are rehabbed & rents increased (usually significantly).  This increase in cashflow increases the property value. 

  • Real Estate Investor · Baltimore, MD · Member since 2015 · 24 posts · 10 votes
    10y

    @Dawn Roof Omg! my husband and I are in a similar situation and this thread has cleared a lot of questions we had!  This is a great network, I'm excited about taking the first step but also freaking out a little, as you said this is a big investment.

    I want to thank everyone who provided educated answers, I don't feel so lost in this business  anymore 

  • Matt PickettPro Member
    Investor · Missoula, MT · Member since 2015 · 12 posts · 0 votes
    10y
    I got frustrated reading posts that didn't advise you to ask for copies of all rental agreements. Even if you don't see the units knowing you are seeing the agreements you will actually take over tells you a ton about likely income for the property. If this has already been advised... Carry on. ;)
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