In contract with a duplex

[Visal Nip]

Hello everyone. Back again with another possible deal in Southern California.

I'm in contract with a Duplex. Both units have tenants.

Purchase Price: $117k.

Down: 20%

I checked out the units and their in good condition, besides the minor cosmetic (paint, possible tile or laminate in the bedrooms). I will have the tenants sign a new lease agreement with me.

Still waiting to do inspection.

My problem is doing the financial due diligence. The owner only accepts cash for rent. I asked for bank statements for deposit verification and her tax return. I also asked for cash receipts she should be giving to the tenants for rent paid. Well, I came to find out she does not deposit her cash rent into her bank, so no bank statements. Haven't heard anything regarding the requested tax return or cash receipts.

Anyway other way for me to verify that the units are bringing the rents the owner stated?

Also, is it normal for the owner to pay me the security deposit she accepted from the tenants? So I can hold the deposit for when the tenants leave & for repairs. I was told it would be deducted from the purchase purchase. Is that wrong to do?

Kind Regards,

-Vi

[Sharon Tzib]

@Visal Nip if the seller is trying to sell this duplex as an investment property, which I would assume she is since it has two tenants, then she needs to assist with the financial due diligence phase, not make it hard on you by being uncooperative. If she refuses to produce her Schedule E (you don't need to see her entire tax return, if she balks), then it's either time to walk away or lower your price since she won't cooperate.

Also, look at the leases, as suggested. But before close, you should get Estoppel agreements signed by the tenants so you can verify the actual rent and deposits on file, as well as any agreements between the current landlord and the tenants (there's an example in the File section of BP).

Security deposits are almost always given to the buyer at close - who is telling you they will be deducted from the purchase price?

If you would like us to critique the deal, we'll need more info like rents, taxes, insurance, mortgage info, etc.