Documents I need to review

[Yashar Fred]

I am about to close on my first property in San Antonio TX soon, what documents do I need to ask the seller to review during the option period?   like shall I ask for Tax receipts, expenses, profit, and loss statements

[Evan Polaski]

@Yashar Fred, you can ask for P&L or tax return (specifically the Schedule E for this property), but I wouldn't bank on receiving much of anything. A list of improvements could also be useful, but may not be sent.  Leases in effect are another item to ask for.

Generally, with a duplex, there isn't much to be seen in financials.  Let's assume the owner has a salaried handyman so he only books material to the property, but you don't have a salaried handyman, so you are paying higher cost for labor, the seller's books won't help. Alternatively, a lot of landlords will book personal expenses to properties to write them off.  But that doesn't mean you are going to get a better price on the property.  And a lot of repairs can be deferred, so if seller has been planning to sell for a while, they may be deferring items to not book the expense, hoping it will not get seen in sale process.  And the biggest one: real estate taxes.  In my area, the auditor will reassess upon sale to sale price.  The seller's financials will show what they paid which could be dramatically different than what you will pay.  Moral of the story, build your own assumptions, don't rely on seller's items.

The moral is: when you go in, do you inspection with a good inspector.  The inspector can help point out items that will likely become repairs or replacements.  Do your own DD on rental rates, since existing leases may be well below market.  And lastly, do your own DD on comps and a fair price.  Duplexes will be valued based on comparable sales more than any other metric, so regardless of what the P&L or tax returns show, you need to be comfortable with the value of the asset based on your numbers.