Strategies for dealing w/ MFR brokers (who fudge numbers)

[Avtandil G.]

Hey folks

I've been looking to buy a couple small (6 to 10 units) MFR. I'n looking to get 7%-8% CAP c-o-c. Have been scouting usual sources like MLS, Loopnet, Marcus... Plenty of fish in metros I'm interested, advertised caps look good on surface, but...

Went through about 60 of these, requesting ttm income / expense report only to consistently discover fudging of numbers to arrive at a higher 'advertised' cap, basically dressing of numbers, including

* not including management expenses (oh, we don't include maintenance fees because they are specific to buyer)

* not including repairs / maintenance expenses (oh, seller just refurbished couple units 2 years ago)

* not including vacancy (oh, the complex is 100% occupied over the last 12mo)

* not including property taxes (oh, buyer can request tax abatement) 

you get the drift. and the conversations stop at the broker level after pointing out to all the gaps, most just stop responding - there are obviously reasonable / experienced folks who smirk and continue chatting but for every one of those, there are 50 who seem to just seem to either be completely incompetent or useless. and it seems to be getting worse vs ~5 years ago when i picked up my last MFR

any thoughts / advice how to deal with these types? is this a common situation for you as well? 

[Russell Brazil]

Management may or may not be included in cap rate. Not including is not fudging numbers.

You almost never need any of the information you are mentioning. You know the cost of the building, and you should know the rents.  Condition of the property can be seen by looking at it.   Basically by pointing out all the gaps as you say, you are showing yourself as a non serious buyer, because the serious ones dont need any of that info.