Multi-family that lacks documentation

[Forrest Shealy]

I have only done SF in B neighborhoods until now. I am looking at a 10 unit in a C- neighborhood. The price is great. The numbers the current owner is giving me are good enough to leave some margin for error, and there even appears to be upside on the rents. The renovation would be straightforward and reasonable cost. The problem is, they have no documentation. The rent roll lacks detail and is not current. They have no record of depositing the rent anywhere. Even documentation of expenses is coming slow and spotty. 

My broker acts like this is normal in this part of the market. How do I find out if some horrible surprise is lurking? I would really appreciate input!

[Charles Soper]

Great job sticking to the due diligence process!  Is the broker your guy or the buyer’s?  Ultimately they are it’s looking to get paid and if that means forcing a deal good,bad, or indifferent then so be it, hopefully not.

Hard to get expenses without help from the buyer but you can at least verify income and what the owner pays for via estoppel statements from the current tenants.  Verify rents, if they’re current, security deposits, what utilities the tenant pays for, etc.  If they have a property manager in place you can try talking to them about what kind of issues the property has or had and the expenses they’re seeing. 

You should also look into the appraisers office and see if there are any open permits, code enforcement fines, or special assessments coming.

Place to start, hope that helps