Looking for ways to get access to T12 and Rent Rolls

[Danny Kao]

Hi All,

I'm a SFH rental investor currently learning the property analysis process for commercial apartments. In the residential world, I can easily get all the information I need to qualify if a deal is worth looking at in person (e.g. open house) just from online information from sites such as Zillow. Real Estate agents are happy to share info too regardless if you've ever bought a house or not before.

In the commercial apartment world, you need at least the T12 and rent roll to be able to do the initial analysis to qualify a deal. I understand that this is something owners would have and are typically made available by brokers to potential buyers, I was just wondering if anyone has advice/tips on how someone new (with no commercial experience) could get access to this data in order to do initial analysis to qualify deals? I found it pretty difficult to find who owners of properties are in many areas via online search, and I don't see why any commercial brokers would want to share this information unless they believe you are a serious buyer (e.g. experienced) who can close the deal as the information is not meant to be public.

In an ideal world, I'd want to get my hands on all the T12s and rent rolls for at least the on-market deals in order to qualify deals based on my criteria and then partner up or pass on deals to an interested team who can pursue and close on the deal.  Thanks!

[Jorjio Hopkins]

@Danny Kao

I completely agree with @Greg Dickerson.  Get really good at understanding the business and terminology first before contacting brokers and owners.  They will take you more seriously and be more willing to give you access to information you request.

I also urge you to take a step back for a moment.  Most commercial apartment deals especially publicly posted on sites like LoopNet are not worth deeply evaluating.  Seek to do a very quick 60-second analysis of apartment deals first, and if they meet your criteria during that initial scan then dive deeper, but if not, then move on.  This will save you a tone of time!

Here is a quick way I run the numbers to see if a deal is worth looking deeper into or not:

1) Find the Income: You can do this by taking the annual income of a property and subtract a - 5% vacancy factor.  (i.e. $100k - $5k = Income of $95k)

2) Determine the annual expenses using the 50% rule - which states the generally the expenses on a property will amount to about 50% of the property income.  (i.e. $95k * 0.5 = Expenses of $47.5k)

3) Calculate the Net Operating Income or NOI = Annual Income - Annual Expenses.  (i.e. $95k - $47.5k = NOI of $47.5k)

4) Determine the cap rate. Hopefully it’s listed for the property if you're looking on LoopNet, but if not you can find it a couple different ways.

- If you know the asking price for the property then you can do (NOI / asking price) = cap rate

- If price is not listed then you can look for active brokers in your general area with apartment listings and give them a call. Take this as an opportunity to start build a relationship with them (key for future business success) and casually work into the conversation ‘what’s the cap rate in this area?’

5) NOI / Cap rate = Purchase Price  (i.e. if we had a 5% cap rate then, $47.5k / 0.05 = $950k purchase price)

If all the information is present then the above only takes about 45 sec.

Spend the last 15 sec. comparing your purchase price to the seller’s asking price if it’s listed. If it’s not listed then pull up a tax assessment on the property to get a ballpark number from the assessed value.

Typically if the purchase price I calculate is within 25% or less of their asking price then I put that property on a list (excel spreadsheet) to do a deeper dive into later.  (i.e. if the sellers asking price is $1.1 Million for the analysis above and you calculate a price of $950k then you know you're within 15% of their asking price, so it's worth taking a deeper dive.)

If this number is greater than 25%, it will be tough to underwrite the property in a way that creates a good ROI, but also will be considered by the seller.

6) Rinse and repeat for all the listings you can find.

7) When you have your new list of properties that passed the first screening criteria, then I evaluate value add opportunities.

8) If you find properties on your new list that you're interested in pursuing at this point, then you dive in to contact the brokers or sellers for their T-12.  You can discuss your initial analysis of the property and tell them you need to see the T-12 and rent roll in order to provide them with a more accurate offer.

Danny, I hope this helps you hone in your commercial apartment analysis process!  If you have questions on any step, please feel free to reach out.