Looking at 40 unit in Texas

[DG H.]

I'm looking at 40 units that's split into 4 buildings. I'm doing the do diligence now. HVAC is older (80's), some of the units have been "spruced up" as a tenant moves. There are 6 empty units, all units are 2/1.5. About half of the units are tired looking and needs a little TLC. All of the units are in good areas. The PM is the owner.  What would you look for the most other than HVAC, plumbing, roof. Many of the leases are MTM now and some residents have been there 2-5 years. Asking 900K. Any pertinent clauses to write into the contract if this works out? How long do you usually add for inspection?

Thank you for the answers.

[Joel Owens]

Texas is a no income tax state. The counties and cities are raising taxes substantially in Texas. Unlike NNN retail properties where it is passed onto the tenants you the landlord in multifamily are paying it.

If property taxes have already jumped a huge number recently ask if the seller is doing an appeal with an attorney or is one in process already??

So for instance if the seller is saying a 7 cap but then taxes go up 20,000 you are not buying a 7 cap but much lower with the higher cost factored in. Another gotcha is if you the landlord pay utility bills for the tenant included in the rents.

You could have no water leaks and the utility company decides to go up 10% on the per gallon usage rates for water and sewer now that they think the economy is doing better. Utility companies held off for the most part in the downturn because they knew defaults would go higher on accounts because there was a recession. Now those utility companies want to keep up with inflation again.

Check if owner has lower property insurance. They might own multiple properties or receive a special discount having all insurance at the provider and your insurance rate is much higher for a single policy.

Make sure not in a flood plain as those policies have gone way up in the last few years almost doubling or tripling.

Many other things these are often overlooked.