Buyers of rent-ready small multis: advice needed

[Wesley W.]

Hello all,

I'm looking to get some feedback from people who have made a practice of buying occupied rent-ready small multi-family properties.

This is my niche of choice, and despite what I consider to be my best efforts, I have had no less than 8 deals fall apart in the last 18 months after being under contract.

They say the definition of insanity is expecting different results by doing the same thing, so I'm looking for some feedback on whether or not this is due to external factors or what I am doing as the buyer. 

I would be happy to indulge the BP community by discussing the process on the forum, or if anyone is willing to correspond privately or via phone, I would accomodate anyone willing to be a sounding board.

Extremely briefly, all the sellers have been unwilling to "meet my demands" under attorney approval or continue to negotiate post structural inspection (with major items flagged by inspector).  They say due diligence is a critical part of the process, but I am getting nearly universal pushback from sellers on providing documentation I think is reasonable under due diligence.  Here is what we ask for under attorney approval:

copies of current COs

copies of lease agreements w/name/photo ID of all tenants

certified rent roll w/ security deposits

year’s worth of water/sewer bills

trash bills

any house electric/heating bills

latest tax bills (school and property)

estoppel certificates from current tenants

Is this congruent with what you ask for when buying an occupied property?  Please share your experiences.

Thanks.

[Aaron K.]

My initial offer is contingent on clear title, C/O's in place, full inspection, attorney approval, and copies of leases.  After initial negotiation and accepted price, I schedule the inspection.  After inspection, re-negotiate if necessary based on condition.  THEN we write contract, which includes demand for ID's of tenants, certified rent roll, last 12 month financials, tax bills, and estoppel agreements.  We don't bother including all of that in the initial offer, because lot of the time the deal dies at the initial offer or inspection stage - so it's a hassle for everyone to process so many additional requests for every initial offer.  Not to say I do it the "right" way either, but it tends to be efficient for us.

I've had alot of deals fall apart post-inspection too, it's just the nature of the beast sometimes.  Sellers don't want to believe that there are issues at their property, and they never believe the repair estimates that you give them.  I was extremely close to closing on a property a few months ago but we found a foundation failure that would require a $30,000 fix (jacking up the building and re-pouring).  The seller brought in their own inspector that wrote the fix to the foundation would be $3000, so they refused to negotiate.