Loopnet Disclosed Financials

[Charles Wiegert]

I am very reluctant to utilize the financial information provided on the loopnet properties. I have just been looking through them trying to get a feel for NOI and prices on different properties. I have no intention of buying a property without formatting my own numbers that I trust. My question is, in your experience, how reliable are the numbers posted on loopnet?

[Tom Lafferty]

Totally agree with @Tom Mole and @Account Closed. Sellers, even very professional ones, often "groom" their income statements (same thing as P&L or T12) when they know a sale is coming. This could even be two years in advance if their goal going in was to rehab, increase NOI, and then sell. They can put all kinds of things below the line that would normally be considered operating expenses. They might do this themselves if self managed, but even large 3rd party management companies will change their accounting practices in preparation for a sale if the owner so desires. As an example, they may be rehabbing units, and all paint can be entered as a capital expense, not as a makeready expense, which you WILL have going forward. So the line item for makeready, or painting if broken down that way, may be very low or not even there. If you don't know to look for it, you may underestimate that going forward. Thats a small one, but there are all kinds of things that can be handled the same way.

Its not just Loopnet either.  Any OM that you get from a professional broker is going to be full of misinformation.  It was already mentioned, but taxes can be a HUGE number.  I toured a property yesterday and will be submitting an offer on it.  The broker shows the taxes in his pro forma as $201,792.  There is even a nice little note explaining that they've accounted for a 5% increase in property taxes for the new owner.  Sounds reasonable, no?  In our area, we typically budget for taxes to go up to 80% of the purchase price, but lately its more like 90-110%.  In this case, 80% puts taxes at $309,787.  Can you imagine getting an unexpected hit of $108,000?!  This is not uncommon either,  it is the norm.  If they're willing to fudge something that they absolutely KNOW for a fact is going to be that far off, imagine how far off anything else can be.

Another common one is utilities in a property with low vacancy. We just closed on a 78 unit property that has 25 vacant units. In my initial analysis, I was using actual T12 numbers for electricity and water. I absolutely know better, but didn't catch it until the second look. When the property gets leased up, guess what will happen to the utilities? They'll go WAY up! We're changing from an all bills paid model to a RUBS, but still, that would have been a huge mistake.

Just make sure you have someone else who knows what they're doing look over your numbers before getting tied up in something.  There are SOOOO many ways to get burned in a multifamily transaction that it is not even funny.