Old 4 Unit Now 5 Unit/Inspection Necessity

[Austin Wood]

We have the opportunity to purchase a five-plex built in the 1940’s for 230k. They pull $2450/month in rent but the landlord pays water and heat. Taxes are $300/month. Two units have new windows, two units need new windows (7k total). The basement does not have an egress window and we are unsure if we need to install one eventually. The previous owner says they put 30k into creating a basement unit with a storm exit just outside the room and a door with a path to the front door, there’s a single new water heater and new single forced air furnace. Four units have brand new service panels and the fifth is new and tied in with the whole building. The new service panels are wired in after the original boxes with wire that doesn’t have ground. Roof is about 15 years old. Attic fully insulated and heat is, at most, 400 a month during winter. Coin operated laundry in basement, some storage, red block foundation that looks good and a front deck. Anything else I should look in to or evaluate?

We’re going to pay cash for the deal and a lawyer will draw up the closing documents. Do I NEED to get an inspection?

We had our friend who is a journeyman and electrician do a walk through with us.

This is only our second deal ever. Anything else I should know/do also considering this is now a 5 unit and considered commercial? What city service do we need to talk to about the additional fifth unit legality and new commercial status implications?

[Colleen F.]

Yes, you need an inspection. You also need to know if the 5th unit is legal permitted and the electric was permitted. I am not saying anything is wrong but your description doesnt make clear that it was done to code. egress window is a concern but more impotantly if you dont have a legal 5th unit you cant use that cash flow in a commercial loan. If you only have 4 units you are on a residential loan, value decided by comps. A 5 unit commercial loan, value is based off essentially income / expense not comps.