4 plex

[Brooks Everline]

Hey there Bigger pockets,  looking into a town home 4 plex, consisting of 2bed/1 1/2 bath units..  Two questions.  1. Best way to evaluate the deal, I have the pro forma noi, expenses, and operating income. What other things to look for price/sq foot, price/unit etc? Help appreciated. 

2. I requested information on property from listing broker and received the mls info that all can access.   Shouldn't I be able to get some sort of property pkg consisting of previous 2/3 yrs of financials, balance sheets, rent rolls, occupancy rates etc..or is this something I would receive after I had an offer on the property? Thanks for everyone s input!

[Nathan Emmert]

If it were a commercial property (5+ units... or more typically apartment complexes), you'd likely get that.

Down at residential properties people don't tend to bookkeep as well, especially the small time landlords.

Take a look through the expenses... especially repairs and CAPEX. If you see a lot of big repairs, the bones of the building may not be good. If you do NOT see CAPEX, then there is probably deferred maintenance (could also be seen in high repair costs... even bandaids cost money!).

In the financials, take a look at the vacancy rates.  It might be somewhat indicative of the previous managers (low rents = low vacancy some times, etc)... but it can also give you a feel for how desirable the area is (market rates + high occupancy = good rental area).

Beyond that, dig into the income and the expenses a little. Are the rents at market rates or can you adjust them? Are they paying the right amount for insurance, grass, snow, etc or can you get better rates shopping around (bumping up NOI)?

The last thing I look at is things like price/unit, etc.  Frankly, if it's producing rents at 2% of purchase price... I think it's a great deal... but I always have to remind myself that if everything else in the neighborhood is being bought at 3% rents... I'm probably getting ripped off.  Obviously it's wise to look at comparable properties (the banks will prior to lending you money anyhow) to see if you're getting a fair price, or better, buying equity with the purchase.