Multi-family unit but no financials

[Evan Miller]

Hello bigger pockets, I have come across a multi-family unit 6-plex. The property has been in the family for a long time and was given to the son after the father died. The son has been handling the property but has done a horrible job in keeping financial records. No standard rent roll or P&L. I know that evealuating mulitfamily is based on income but if he os not able to provide proper financials what should I do?

[Robbie Reutzel]

@Evan Miller, this happens quite a bit.  What we end up doing is collect as much information as possible.  If they're all TAWs you will have to go by what the seller says but you can also knock on the doors and ask the tenants.  You can then adjust expenses based on a few factors:  does LL pay utilities or tenants?  Are the units sub-metered.  Start with expenses at 50% or, if you own a similar building in the area, you can use your own experience for expenses.  If tenants pay utilities you can set them at 45% of income.  

@Dennis Tierney is correct you're going to find it difficult to get financing for this from a traditional bank but there are other lenders you can find. 

You will be amazed at how much paperwork sellers can/will produce once you explain to them you have to set expenses high unless he can substantiate them.  

Good luck!