Requiring bank statements ?????

12 Replies

Trying to get under contract on a 5-unit, and only basic table of rent, expenses has been provided. Seller adamantly opposed to providing bank statements for income/expense verification. Is that a huge red flag? Are folks requiring bank statements to help ensure you’re not buying a property full of late paying/non-paying tenants?

Not a red flag if they don't have a separate account, they are giving you a ton of personal info.  Let's say it has $1M in it you'd try to negotiate a little harder, or at least they think you would.  There are other ways to get the info you seek, including but not limited to just the line on their tax return pertaining to this property etc.

Red flag indeed. It’s apart of my criteria to verify rents are deposited for the last 6 months. 

Technology has advanced far enough to allow one to pull isolated information and protect personal finances from being unnecessarily disclosed in bank statements.

To your success!

Thanks for the replies. This is yet another wrinkle in what has been a fairly odd negotiation full of some odd requests, none of which give us confidence that the seller isn't trying to hide something.

Originally posted by @Aaron K. :

@David Avetisyan how would one pull isolated information like that?  I don't know of a way, and if I don't it is very possible this seller doesn't either.

 Most banks allow you to view individually deposited checks. 

For sake of arguendo, let’s assume he’s old school; the seller can take his physical bank statement, black out  private information with a black marker. 

If there is a will, there is a way.

@David Avetisyan true, but for example my property manager will either direct deposit or send checks with multiple properties lumped together thus rendering individual checks or transactions pointless.  I think there are better ways than asking for a bank statement to ensure the tenants are paying on time, such as the tax return which will not only show the income but the expenses as well.

@Drew Leonard just tell him "that's OK your tax returns will give me all the info I need".

If you know this is a home run deal without verification of the numbers, then don't worry about it.  If you need his number for verification then stand firm. 

Don’t worry. Someone else will buy it, just pass. They’ll know what the market rents are and what they’re going to charge even if they have to evict everyone. Leave it to someone that doesn’t care what the current tenants are paying or not paying, especially on 5 units. 

Originally posted by @Drew Leonard :

Trying to get under contract on a 5-unit, and only basic table of rent, expenses has been provided. Seller adamantly opposed to providing bank statements for income/expense verification. Is that a huge red flag? Are folks requiring bank statements to help ensure you’re not buying a property full of late paying/non-paying tenants?

I’ve bought lots of deals (and sold quite a few with offers being even more common) and never once asked for banks statements. Never once been asked. If so I’d say no. 

I wouldn’t look at it as a red flag. In this market someone likely had 50 offers. Some all cash, close in a week. Not even a tour needed. 

Originally posted by @Aaron K. :

@David Avetisyan true, but for example my property manager will either direct deposit or send checks with multiple properties lumped together thus rendering individual checks or transactions pointless.  I think there are better ways than asking for a bank statement to ensure the tenants are paying on time, such as the tax return which will not only show the income but the expenses as well.

 “Can I see your tax returns” - buyer

“Lol. No” - me. 

Do people really ask for and get this stuff? 

Even a novice should be able to proforma and understand if a 5 unit will cash flow (if it’s a good deal is a different analisys that can’t be provided by seller data). A basic rent roll at most should be all you need. 

Property taxes can be looked up 

You know what you pay for insurance on a given value so who cares what they pay 


ditto management. 

you know your debt service so who cares about theirs

Maybe they stuff capes into their income statement. Maybe they don’t. 

Seller financials on class C multifamily are worthless to the point where I don’t even look at them anymore 

Originally posted by @Bill Brandt :

Don’t worry. Someone else will buy it, just pass. They’ll know what the market rents are and what they’re going to charge even if they have to evict everyone. Leave it to someone that doesn’t care what the current tenants are paying or not paying, especially on 5 units. 

Excellent point. I’m asked how I get such good deals (I guess to the extent I do) and I guess it’s because I’m not asking sellers for tax returns. Word gets to brokers that I’m the “easy” buyer and they push my offer  

 

Appreciate all the additional thoughts. Obviously folks on both sides of the fence here. I always hope for a clear cut answer, and always find out it comes down to each investor's personal preference/tolerance on this stuff. Thanks again.