I am evaluating multi-family purchases for a 1031 exchange ( I sold my office and now planning to exchange into multi-family). There is a property that otherwise "looks good to me on paper" for a portion of my exchange. The broker shared inspections done by a potential buyer who walked away due to their lack of stomach for the deferred maintenance.

The 20+ units are 100 percent occupied. Inspection reveals that Air/furnace/water heaters are mostly original and all around are well-well beyond their life expectancy and many are original making them over 33 years old. A small count of them have been replaced as needed when they died beyond repair.

Long story short, The majority are destined to needing replacement as they go, one-by-one in the near future. This alone is probably eventually $5K per unit in the next few years. Or tomorrow.

If there is $100K of system replacements in the near future, any opinions on how to structure that? Aside from making a offer that reflects this? And riding it out and pay out fixes at needed? And/or is there any merit/logic/stupidity to structuring the offer that has seller crediting back a Cap-X fund of $100K or so? So that it is otherwise financed in the deal with the mortgage I would get on the property, rather than tapping outside funds or borrowing secondary money? If I had funds already in place, I'd be inclined to make some pro-active replacements ahead of their failure, rather than having the replacements nickel-and-dime me to death.

Thoughts?

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Strucuring a purchase that has notable cap-x needs

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