Rental Property Investor · Glenwood Springs, CO · Member since 2018 · 47 posts · 24 votes
Hey all,
I'm looking to buy my first multifamily property and I came across a deal that I love the location of, rents are way under market, and I can afford. Here's the question: current owner is unwilling to allow look inside or even pictures until in escrow. This seems fishy, and I am pretty much going to pass on this because it seems like a red flag to me. But, I am new to real estate and have only looked at a handful of deals at this point so I figured I would ask here. Is it normal to avoid giving people info? Doing the math on the rents that I know it seems way overpriced already and with him being unwilling to provide any information I am guessing it is a total wreck inside the homes. Should I just run and not look back?
Just make the offer contingent on you approving P&L or whatever paperwork you want to see. Show him that you're serious and then he'll have to provide the documents. But if you' think that it's overpriced, think about what you want to offer.
Put yourself into the seller's shoes: There are so many investors and wannabe investors, that are just tire kickers. Tenants would be very unhappy, if there was a constant stream of potential buyers going in and out. I know that I wouldn't want that in my home.
Put yourself into the seller's shoes: There are so many investors and wannabe investors, that are just tire kickers. Tenants would be very unhappy, if there was a constant stream of potential buyers going in and out. I know that I wouldn't want that in my home.
Thank you for your response. Is hiding the P&L statement a redflag or you also wouldn't worry about that? I mean I can only make an offer based on the provided rents and estimating expenses.
Just make the offer contingent on you approving P&L or whatever paperwork you want to see. Show him that you're serious and then he'll have to provide the documents. But if you' think that it's overpriced, think about what you want to offer.
First a terminology issue; I think you mean that the seller will not provide info until under contract. I believe Escrow is once you go firm / commit to the property after due diligence (DD). If they actually mean after DD, then yes it becomes a red flag to me.
For me no information until under contract is a yellow flag as most owners who are interested in selling know that they have to / should provide some information. IF they don't, they force you to make conservative assumptions (e.g. expenses, capex, vacancy, etc.) and you end up putting in a lower offer.
Another tactic / strategy is to simply give him his price (with the proper out clauses), get the information and then re-negotiate the price. I don't like doing this but lots do.
@Travis Kemper it's not that fishy. The owners dont want to waste their time sending our financials until someone is serious. As @Michaela G. said, just make those things part of your offer. That way you make the offer, it gets accepted, you put some money in escrow, then you inspect the property and financials and renegotiate from there.
@Oren K. Thanks for the response. Just seems like a waste of time to me to make an offer and then have to renegotiate, but it is what it is ha. They said escrow....as I said, not very experienced, so I just went with what they said.
I'm looking to buy my first multifamily property and I came across a deal that I love the location of, rents are way under market, and I can afford. Here's the question: current owner is unwilling to allow look inside or even pictures until in escrow. This seems fishy, and I am pretty much going to pass on this because it seems like a red flag to me. But, I am new to real estate and have only looked at a handful of deals at this point so I figured I would ask here. Is it normal to avoid giving people info? Doing the math on the rents that I know it seems way overpriced already and with him being unwilling to provide any information I am guessing it is a total wreck inside the homes. Should I just run and not look back?
Thanks all,
Travis
Agree with what everyone here says. I would just add that when you do go under contract; have a general contractor with you (if you don't know what you are looking for) during the inspection period to give you a ball park estimate of how much things will cost. You have to re-negotiate the price within the inspection period so you won't have time to take pictures and go back and forth with a general contractor to determine an estimate. Easier for him to be there and see it in person.
Look into what's called a Letter of Intent, LOI, which is used in the multi area as a sort of "pre-offer".
After that I’d encourage you to submit what they request and as long as you have a due diligence and a separate inspection contingency you should have plenty of ability and time to back out. There’s other contingencies you can use too, financing, feasibility, environmental, neighborhood review...
Have your DD start the 1st business day after they provide you with all the documents, P&L sure, but also you’d want title docs, details on mechanicals like age, repair history and warranty status, insurance claim history for the last 5 years, every scrap of detail on any pending claims, zoning use confirmation from relevant govt entity, copies of all docs they have received from any govt authority related to the property for the past 5 years... there you’d be looking for code violations, notices from EPA or fire marshal, etc. (Do some research on what docs you want to request, I’m suggesting for you here just a partial sample list of what I’d want.)
A seller holding back P&L and inspection until an offer is accepted isn’t uncommon at all. I would call it a red flag if they resist giving you everything you request for your DD document list quite quickly, their speed and thoroughness in response to that shows their willingness to sell imho.
When you schedule your inspection you want all your professionals there at the same time to go through a single time, contractor, inspector, and any specialists you think you might need like roofer, engineer, etc.
Also don't feel pressured to make your DD and inspection time as limited as is common in SFR, give yourself 2-3 months at least, again, from when they deliver the docs you request.
Besides financial DD you want to do physical DD not just on the property via inspections but visiting the area during day and night, weekdays and weekends, to ensure you have a feel for everything that’s happening at different times all the way around the block.