evaluating MF

[Kyle Bentz]

What is you process when evaluating a multi famialy property? Whats your step by step process?

[Will Barnard]

My steps pre-contract:

1. Get the financial data for at least one year, two years is better. Analyze gross income, operating expenses, and edit accordingly (many sellers don't include property management fees or other expenses - just because they self manage does not mean I will or that I will work for free!). After adjustments, I come to the new NOI.

2. Step two is occupancy - I get the rent roll and add it all up making sure it matches the gross income. 

3. Photos - I look through all the supplied photos of the property to identify deferred maintenance. I also ask seller to supply a list of known defects which help in evaluating this number.

4. Location - I verify that the location is good, check previously sold units in the area to comp the cap rate on the asking price, I check the crime report for the specific property as well as the immediate area, and also check the sex offender list to make sure no known sex offenders are living within the building or the neighboring buildings

5. I gather all the items requested by me from seller and analyze all the info. Here is my list I ask for typically, sometimes it has more, sometimes a few items are taken out in the request.

1. Last two (2) years year-end financial statements and tax returns (Schedule E only for the property, not personal).
2. Current or previous inspection reports (if any)
3. Current appraisals or previous (if any)
4. Tenant Ledgers (Rent payment history - last 6 month schedule).
5. Rent Roll (24 months)
6. Last two years P&L financial statements
7. Litigation (existing and pending if any)
8. Floor plans
9. Interior and Exterior photos
10. Ages of roof, windows, heating systems and cooling systems
11. Age of appliances
12. Name, address, and telephone number of property manager and all vendors
13. Last 12-months utility bills
14. All service contracts
15. Insurance policies and loss runs for last 5 years (if any)
16. List of all personal property utilized by Seller in the operation of the Property that is currently located on the property
17. Current and last 2 years property tax bills
18. Lease agreements
19. Known Zoning ordinances affecting the property
20. Known Environmental issues affecting the property
21. List of improvements and/or repairs done during ownership
22. Seller’s list of any expenses not listed before.