Things to look at on Quadplex showing and put contingency

[Jaekwan Lee]

Hi folks,

I am new on buying a property and trying to househack on fourplex property that is 40 years old(1980's). The showing is scheduled and as long as no big concern arises, I am going to make an offer. So I have a few questions. 

- What are the things to look for while we are in showing the property other than kitchen & bath room update?
- What are the typical/favorite contingencies do you add for four-plex property?
- Any useful questions to buyer/seller agents?

Here are some details about the property.
Price: 480k
Age: 1986
Rent: 1100 ~ 1200/unit
CoC: 3%
CAP: 7%

I am a first time buyer and house hacker so any insight are appreciated.

[Drew Sygit]

@Jaekwan Lee see copy & paste below:

Purchase Agreement Clauses for Buying Tenant-Occupied Rental

If you’re considering buying a tenant occupied rental property, there are some documents you want to acquire for review prior to
the closing. Once the closing takes place, the seller has zero incentive to cooperate with supplying them.

Not only do you want to obtain these documents, you also want time to review them well before the closing because unfortunately,
there’s always the potential that one, or several, of the documents may be fraudulent.

So, let’s go over each document and why it’s important:

1. Lease: this one should be obvious. A lease is a contract between the landlord and tenant. It spells out the monthly rent,
when it’s due, the length of the lease (or term), should contain clauses required by the federal and state governments, and
much more. Without the lease a buyer has no legal means to collect rent from a tenant or evict them for nonpayment.
2. Rent Ledger: this is a record of all tenant charges and payments. It proves if the tenant is current on their rent and their
history of whether they’ve paid on time or not. It should also show any security deposit collected, pet fees, cleaning fees
etc.
3. Tenant Contact Information: current phone number and email address are needed to be able to communicate with tenants.
4. Tenant(s) Government Issued ID: typically, this will be a driver’s license to prove the identity of the tenant(s). Without, you
have no way of confirming the occupants of the property are those named on the lease. Proper identification of tenants is
also needed if you want any chance of having local code enforcement write tickets against the tenant and not the owner.
5. Any Legal Action Documents: you’ll definitely want to know if the current landlord is evicting or suing the current tenant(s).
6. Tenant(s) Social Security Number: this should have been obtained by the current landlord to do a background check during
the application process. A new owner will need it if they want to pursue collection and garnishment for unpaid rent and/or
property damages.
7. Tenant(s) Employment & Bank Information: additional information useful for garnishment actions to collect unpaid rent
and/or property damages. Usually collected as part of the application process.

Fraud: let’s not pretend it doesn’t happen. Desperate sellers do desperate things. We’ve seen fake leases and rent ledgers, even fake
tenants - who were placed by the seller to backup the fake lease and ledger. So. it’s not uncommon to request proof of rent deposits
via bank statements and corporate/LLC tax returns. Of course, it can be almost impossible to validate any rents the seller claims they
collected in cash. So, sellers can also be asked to sign notarized affidavits personally guaranteeing the validity of leases and ledgers.

So now, let’s get to the clause to include on your purchase agreement to make sure you get all this information in enough time to
review it.

Seller(s) agrees to provide the following to the buyer within X days of buyer’s satisfactory inspection, but in any case at least
X days before closing: All rental leases, rent ledgers, tenant(s) valid phone numbers and email addresses, rental applications
& supporting tenant identification, income and asset information, any documents corresponding to any ongoing legal
actions pertaining to the property, leases, service contracts, etc., at least three (3) months of the most recent bank
statements for any account(s) rental funds were paid into and any company or corporate tax returns for proof of income and
expenses. Seller(s) also agree to sign an affidavit at closing personally guaranteeing the validity of all leases and rent
ledgers.

Now that may seem like a lot for a seller to agree to, but if they have nothing to hide, why would they not agree?

As always, none of this should be construed as legal advice and we recommend you consult a real estate attorney.