Requesting Advice: Purchasing an apartment in building that failed inspection

[Dar Baruchim]

Hi All,

This would be my first investment property. The unit, in North Miami, would be paid for all in cash since the building didn't pass the fire inspection (ie. proper exit signs, etc) and wont be approved for a mortgage (it has passed the structural inspection however). The property manager has told me they're working to fix all the issues. Additionally, i live in Chicago, so i won't see it before closing which is in 30 days. My questions are:

Can i find a copy of the fire inspection report using the address? 

How big of a concern is this, 1 = "nothing to worry about" and 10 = "run"? and why?

How would you mitigate the risk?

What other parameters do you use to assess the worthiness of a deal?

Thanks in Advance!!

DB

[Greg Scott]

As your first investment property RUN. I've heard too many horror stories about people that pay cash for a property because they think they are getting a deal.

A moron of an owner could see they could get a much higher price if they just put in the exit signs (etc) and then sold to someone with a bank loan.  Odds are there is much more hidden here than is being shared.

A seasoned investor could probably mitigate these risks, but they would run EVERYTHING to ground.  They would have to oversee third party reports just like a bank would.  They would hire a company to do Phase 1, PCAs, ALTA assessments and the like.  If you don't know what I'm talking about there is a much higher probability of getting burned.

[Michael Smythe]

@Dar Baruchim you should see your first few investment properties and find experts to assist you.

Buying sight unseen OOS is not recommended for newbies.

[Jonathan Klemm]

@Dar Baruchim - Is a fire and structural inspection something specific to Miami, we don't have those here in Chicago.  What exactly is included in these inspections?

Paying all cash usually means high risk, high rewards if handled properly.  Surely you have some boots on the ground fighting the onsite battles for you right?

Any reason you decided to invest in Miami?

[Andrew Syrios]

While the issues you mentioned sound completely fixable, it's a big red flag that it failed the fire inspection. This is something on the manager that you can address yourself, so if they're incompetent or negligent, you're basically stuck. 

I would think the manager could give you a copy of fire inspection report. Maybe the fire department would give you that. But I would be much closer to run unless you can get exact specifics on when the issues will be addressed and see proof it's being done. But for a new investor, this wouldn't be the one I'd want to start on.

[Robert Ellis]

Quote from @Dar Baruchim:

Hi All,

This would be my first investment property. The unit, in North Miami, would be paid for all in cash since the building didn't pass the fire inspection (ie. proper exit signs, etc) and wont be approved for a mortgage (it has passed the structural inspection however). The property manager has told me they're working to fix all the issues. Additionally, i live in Chicago, so i won't see it before closing which is in 30 days. My questions are:

Can i find a copy of the fire inspection report using the address? 

How big of a concern is this, 1 = "nothing to worry about" and 10 = "run"? and why?

How would you mitigate the risk?

What other parameters do you use to assess the worthiness of a deal?

Thanks in Advance!!

DB

 can you send me the numbers? I haven't seen one apartment deal work. most are covered land plays for redevelopment. you can buy performing assets that sit on plots of land that can be upzoned. I have sites you can purchase where we can 2x your money in less than a year all cash through zoning and entitlements. I'll shoot you a PM. I'm curious to see where the deal is at in miami. we stay close to the urban core and always in the city of miami which is developer friendly 

[Ecaterina Katerina Morosan]

Hi Dar, ask for minutes for the past 12 months from the management/board and request the last fire inspection report. They have to provide these docs to you as a future homeowner. Put some pressure on the sale side since they're the ones who can legally request these docs as current owners. Make sure you extend your due diligence period until you receive and review the docs. Also, make sure there are no upcoming assessments and the building has enough financials to cover the issue using the savings. These are some things your agent and/or attorney/title can help with. Good luck!

[Dar Baruchim]

Hi All,

Thanks for your help. I cancelled the deal. All the best