Going to see a Multi-Family

[Carlos Gamero]

Hi, these boards are great! I have a few beginner questions. Thank you very much.

1. When one goes to see a MF, if there are already tenants living in the apartments, how to check the condition of the units? Can potential buyers just go in and look around and everywhere and turn faucets and switches on and off and see if they work? Doesn't seem right, but one has to know the condition of the units somehow. If I make an appointment to go see an occupied MF, what is the best way to examine it?

2. If one is checking out an empty MF, what are the big items to look out for? The things that are about to go bad that can be a big expense in the near future? In my list I have the roof and mold in ceiling/walls.

3. If the seller provides 3 years of rent rolls and operating expenses, how can I look for signs of maintenance that has been deferred for too long? Unforeseen repairs that can eat up all the cash flow are what worries me the most. I have seen listings that advertise MF's with low operating expenses, but that may be because little preventive maintenance is being done.

4. Is it at all ok to talk to the tenants and see what kind of relationship they have with their current landlord? Also to find out what kind of people are living there.

[Nathan Emmert]

1) You should be escorted by a Seller rep when viewing an occupied apartment though your realtor may serve that function. People may or may not be home. Things like faucets will be checked by your inspector but don't be afraid to check under sinks for thinks like rot (water leaks). The overall tidiness of the units will also give you an impression of the management of the building (tenants tend to reflect management and maintenance level).

2) Big things are your big ticket items... how's the foundation... are the shingles curling? How old is the furnace and hot water heater? Can you find the main water shutoff valve? Are the utilities split or on a single meter? Is there washer/dryer service provided or hookups in the unit? Look for signs of water damage, look for gutters, look for termite damage. Also feel out the apartment to understand what it will rent for in your market, how does it compare to others?

3) Repairs happen, the big ones you can see yourself or your inspector will tell you about. It's better you find them first and price them into your initial bid as some people view it as a "game" if you try to renegotiate too much after an inspection, especially if the things were obvious prior to the inspection. Rent rolls will help reinforce the market rates you figured yourself in Step 2 above... they will give you a current view of existing tenants if they exist... but beyond that, not much. You're better off running your own numbers then trusting seller documents.

4) I absolutely talked to the tenants. They not only know the building, they know the neighborhood (i.e. the cops have been next door 4 times). They can tell you about deferred maintenance or other issues (yeah, the sewer has backed up into the basement twice in the past month). They might even reveal future plans (I haven't paid in 3 months but I will catch up, I swear!).

Hope that helps some...