Estimating operating expenses without Schedule E

[Sean McDonald]

I’m looking into buying a duplex listed at $100,000. Each side is rented at $600, which is below market. It’s in B- neighborhood transitioning upward. I have structural reports from 4 years ago that indicate that roots from trees planted against the house were damaging the house. The report reads that bricks were becoming loose with potential to fall and injure someone. At least 3 trees need to be removed at $1000-1200 each. I’ve yet to do a tour because I’m not local but pictures show a home with some issues that may only be cosmetic. If there are any other structural issues, they would have had have come up in the last four years. My agent has told me that the structural issues have not been addressed and I believe the landlord has probably ignored all maintenance issues. She won’t provide a Schedule E or any other expense report and her agent stated that she may not have one. What should I do to estimate operating expenses for the home when I tour? What are some questions that I should ask the landlord? What should I ask the tenants? Thanks for the help!

[Soh Tanaka]

Ask tenants if there's any leak, if anything got worse since they moved in, ask how the heating/cooling is, ask what kind of issues they had since the move-in. Take a look at how old everything is, turn on/off to see if they work, check the ceiling for any leak, under the sink. You may want to pay some GC to walk with you, and have him give you an estimate on the spot. Run the numbers to the best of your knowledge, and if it looks like a good deal, hire a professional inspector.