Seller Concessions based on multifamily inspection

[PJ Singh]

Hi BP'ers, 

I recently have an inspection done on my first 25 unit MFH under contract in Houston TX. It is a 1970 single-story, garden-style brick MFH ( 3 building).   As part of the general inspection report as well as other  specific inspection '' like roof, Foundation, HVAC" , following are the major finds: 

Foundation inspection: I understand with 50 years old building in the Houston area, there is a possibility of some settling. however, 2 out 3 building has significant sloping backward causing cracks in walls and floor.  Likely cause with inadequate drainage of rainwater in the backyard. 

Water drainage issue: Water pool in backyard with nowhere to drain causing foundation issue. Inspector suggested installing french drain or pumps to drain. 

Roof inspection: 2 out of 3 roofs are old roof and 1 is a 3 yr old roof. all have leaks. Roofer recommended replacing old roofs (beyond repairable).

plumbing: All are galvanized pipe.

Interior unit inspection: 8 out of 25 (32 %) of units are in rought condition which needs heavy upgrade.

During the initial tour, the seller showed only 1 unit (probably better looking one, in the new roof building and least foundation issues) to us to estimate our rehab budget. Clearly we underestimate the rehab budget on 8 units as well as major capex items. Our rough estimate to fix all issues is in six figures. 

 Question: Is it reasonable to ask seller concessions on all the above items to fix it? Or these issues are typical to the 50-year-old building and you choose not to fix it. What I was told by maintenance/PM staff during the inspection, these issues were inherited by the current owner and they choose to operate with band-it solutions on capex items. 

Also for the future, how to do I make sure, I capture major capex items before going under contract. 

I just want to get an opinion from experience operation/syndicators? Thank you in advance for your help. 

 

[Tj Hines]

@PJ Singh

Is it reasonable to ask seller concessions on all the above items to fix it? (Yes this reasonable. You can even ask the seller for a repair allowance, or renegotiate price. If seller says no to both, walk away from the deal and get your EMD back assuming it has not gone hard.)

Or these issues are typical to the 50-year-old building and you choose not to fix it. (Yes these damages are common in a 50 yr old structure, but what isn't common is not fixing these issues. You have to fix these issues one way or the other)

What I was told by maintenance/PM staff during the inspection, these issues were inherited by the current owner and they choose to operate with band-it solutions on capex items. (Sounds like slouchy slumlords that care more about fattening their pockets, then caring for the residents)

Also for the future, how to do I make sure, I capture major capex items before going under contract. (Always always assume worse case scenario going in. You should factor anywhere between 5-7K a unit for capex)

I just want to get an opinion from experience operation/syndicators? (See above)