What's the right questions to ask before purchasing an apartment from a landlord?

Question

Currently looking at two properties that are both apartments

One is a 4 bd 2 ba for 460K for 82 days on market

the other is a 10 bd 10 ba 650K for 19 days on market

These are both for sale by owners, so the question I am asking is when buying a property from a landlord such as an apartment building what are the right questions to ask to make sure I get a good deal and you're not getting screwed over?

Kevin Sobilo · Answer

@Rickey Brunson, the question I would ask in your situation would be:

"What is the best way for my realtor to get in contact with you so that we can put this deal together."

1. You need someone to write a decent sales contract anyways. Why pay a lawyer to do it when you can use a realtor who does this all the time and then also get other representation through the process.

2. A realtor knows the pertinent laws. For example, MANY for sale by owners don't realize they need to disclose material defects about the property. They want to sell "as-is" and believe like selling a car that absolves them of responsibility when in most places it does not!

3. A realtor knows how to handle existing tenants whether that is to negotiate to have them removed before closing or to get estoppel statements about their tenancy situation.

AND MUCH MUCH MORE!

Its worth you paying your own buyer's agent a commission to represent you in a situation like this where you aren't sure how to proceed on your own.

Max Ferguson · Answer

There are a ton of question. Check sewer line, roof, tax liens, furnace, A/C, window age, etc... Run comps to make sure prices are fair as well. Make sure if you do the whole thing off market you get a good inspector to flag anything that needs attention.

Marc Rice · Answer

You'll want to underwrite it based upon the property location, condition, and rentability.

Rickey Brunson · Answer

Thanks this was very helpful

Michael Dumler · Answer

@Rickey Brunson, as noted above, save yourself the time and headache of hassling with the seller directly, and instead, work with an experienced broker. Your real estate agent will know exactly what to ask and how to ask for it without being pushy on the seller. That being said, since the properties are FSBO, don't expect the seller to cover your agent's fee. Best of luck!

Scott Allen · Answer

@Rickey Brunson

I know about the two that you're talking about at $460k. I offered that guy $300k for each. You might want to consider looking for an investor friendly agent that can put other deals in front of you.

Details I like to know, rents, lease terms, age of mechanicals, any updates/renovations. I'll look over my own comps and decide on what I want to offer after that.

Scott Allen · Answer

@Rickey Brunson With what they are and where they're at, they're more so gauged towards someone who would want to live in one side and rent out the other side to get started. Just priced too high still

Rickey Brunson · Answer

Yeah, he dropped down further but not in the 300's. It wont work! You'll end up losing money instead of getting a profit.

Hunter Brookshier · Answer

@Rickey Brunson,   I would work with a broker to make sure you get their sense of what a good deal is (or isn't), but generally here are some things you want to know/see:

• 1. Ask for a current Rent Roll and Operating Statement for the last 12 months (this is sometimes called a T12 [trailing 12 month report]).   This will give you the current tenant info, the rent schedule, the move in dates, security deposits, and the OS will give you the recent operating history, including the actual expenses the owner is incurring to run the property.  With this you can run the expense ratio (expense to income), and reasonably calculate the NOI (net operating income), and therefore get the Cap Rate (based on what their sales price is).  This can help you decide if it's a good deal for your goals.2. Ask to view the property (including any vacant units) before you write an offer.  Many people will not allow this, and will say "Write offers subject to interior inspection", in which case, you will need to write an offer through a broker or attorney, and view the interior condition during your inspection period.  This also helps you determine if the condition of the property is good enough.  If it needs a lot of work, you have to plan for those expenses/renovations.  This is usually not cheap.3. Finally, you can ask the seller some questions, including why they're selling, what they've done to improve the property, how long they've owned it, if there's any problem tenants or tenants who owe back rent, why the rents are under market (if they are), and so on.  This can help you get a sense of why the seller is motivated, and what problems you may encounter when you become the owner.All this said, you'll probably want to hire a good real estate broker who knows multifamily to help do all this for you.  Working with good brokers can be invaluable to your success not just in finding, but actually ACQUIRING decent deals.   Good luck!

Russ Kitzberger · Answer

The only way to mitigate risk is to either buy something so far below market you can't miss or to do due diligence.You can spend tens or hundreds of thousands of dollars to do full due diligence on a commercial property.It is all about having a risk conversation with your agent or attorney until you develop enough knowledge and experience to identify risk yourself.

What's the right questions to ask before purchasing an apartment from a landlord?

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