Asking Realtor (Seller) what units rent for, is it wrong?

Question

When analyzing properties, is it wrong protocol to ask the listing Realtor what the units are renting for? I see others using 'RentOMeter' and Craigslist.

Ned Carey · Answer

@Jim Williams you absolutely should ask what units rent for. You should also verify it with tax returns or knocking on doors and getting estoppel letters.

Keep in mind that you probably wont get verifiable info until you have the property under contract. You get this info under the due diligence period.

Frank Wong · Answer

You should ask the Realtor but you need to do your own homework.

@Steve Vaughan a lot of the times residential agents don't even know or think of listing the rents for a 4plex. I know its so basic and it should be the min required info but it happens all the time.  Another reason is the agent knows the rents are too low to support the listed price and leaves it out.  It's usually the first reason.

Steve Vaughan · Answer

I don't get why multifamily listings often don't post rents as part of the listing.   Or even home rentals.

I saw a quad just hit the MLS in my area.  Shockingly high asking price, listed with a young residential agent. Not boo about rents or expenses.  A ploy to make you contact her for basic info that should be listed?

Serious investors aint got time for dat (que Sweet Brown video ;) If I do inquire, I'll already be a little put off going in.

Agents- post basic info when listing income property already!

Steve Vaughan · Answer

I think the rents too low to justify the price to an educated investor is often the reason.  Same with FSBO sellers.  They want to sell for what potential rents could be, usually after the buyer puts work into it.

My specific quad in question lists a pro forma CAP Rate of 7.87%. But no rents or expenses or NOI listed.

A recent one had a cap listed of 15.  Cap of 15??!  Do you mean GRM? Oh yeah. That one. LOL

Jay Hinrichs · Answer

why commercial brokers do blue sky proforma's.. with maybe a mentioned room to raise rents  or rents are under market etc.

although in practice raising rents too aggressively ( if there are other units available in the same basic area) can lead to vacancy cluster.

the big syndicator i worked with in the 80s basically got wiped out in Dallas with trying to take a CA strategy to Dallas.. when he tried to raise rents people just moved.  one has to be cautious when your tenant base describes were they live as   I stay here .. its subliminal but to me it means they are just staying not residing.. or when i travel I stay at the Hilton.. i know its not long term.

Russell Brazil · Answer

Yeah I upload rent rolls or other documentation to the MLS, but only agents can see that information.

Then another reason you might not see actual rents, is because the actual rents happen to be far below market rents, so posting the actuals will hurt the marketing of the property.

Ned Carey · Answer

@Steve Vaughan I am with you 100%. It makes as much sense as saying "our company is issuing corporate bonds but were not going to tell you how much interest they pay."

@Frank Wong agreed but an agent shouldn't waste his or her time without knowing the most important metric of an income producing property. Nor should he or she waste their time on a listing that is grossly overpriced.

Tahra Wright · Answer

@Jim Williams  If the units are currently occupied then the realtor should be providing you with that information as the first part of your due diligence.  Now, the other part of your due diligence is determining what market rents are.  I would not rely on a listing realtor for that, plus if they are a realtor that specializes in selling mult-fams they will think that's a "novice" question which could hurt your credibility and ability to get the deal. That part of the due diligence you need to do on your own or consult with another realtor.  I would use tools like RentOMeter, Craigslist or if you have access, the MLS to see what units are renting for.  You need that information to know whether the current rents are below market, OR if it's unoccupied what you could rent it out for whether "as is" or renovated. All of this goes into your analysis of what to pay, what your ROI is and cash flow.

David Fernandez · Answer

This is so true. I think most people underwrite deals thinking that they can raise rents $100/month and  still use a standard 5% vacancy rate. This can potentially lead to a very bad cash flow situation in the short term, when also using max leverage.

In 2018 I repositioned a 13 unit building and I run a vacancy cost of 17.35% +  3.8% tenant placement commission. In addition, I had to spend money turning the units over. I knew this strategy was aggressive, but this was a moved that made sense for this building (I increased rents $475/month and my tenants are great now).  I went into it with ample cash reserves and I would not recommended doing something like this without, at least, a full year of expenses in the bank.

Jay Hinrichs · Answer

ya some agents will post rents on the agent only side of the MLS.. is see that often..  proforma's are usually blue sky what can it do not what is it doing.. Me thinks once you get into contract that part of due diligence is review leases , and the estoppels if you have the time and can get the tenants to cooperate..

Asking Realtor (Seller) what units rent for, is it wrong?

Most Popular Reply