4-plex under contract - now what?

Question

I just put a 4-plex under contract And I’m in the due diligence period. While I’m in the real estate business as a residential agent, I feel a bit like a fish out of water with multi-family.

The main question I have at this point is this: what documents should I be getting from the seller that pertain to the property during this DD period? I’ve gotten most of the leases, a couple of repair tickets and that’s it. How extensive a document dump should I expect or require so that I can have a comprehensive understanding of everything involved?￼￼

Peter K. · Answer

Hey Jon,

Since it's still residential and you're not in the commercial space (5+), treat it as the same as if it's residential - the process is the same.

The biggest thing you should look to get during DD period are: current lease (which you already have it seems), P&L statements for the past 2 years, any major repairs done (receipts), sub-metering (if applicable), what you owe as landlord vs. what tenant pays, estoppel agreement making sure you & tenants are on the same page,  etc.

Best of luck!

Will Fraser · Answer

You should look into the utility costs for the property (better gained by calling the utility providers than asking the seller usually), have the seller participate in an Estoppel agreement, and that's about it in my opinion.  If you were looking at a 20-unit commercial property you might look at a much more extensive round of documents, but for a 1-4 unit you're still in the residential world and the open market tends to simplify the sale process for 1-4 units.

Jon Tripp · Answer

@Peter K. Thx! Appreciate the guidance.

Jon Tripp · Answer

@Will Fraser appreciate the follow up. Tenant pays all utilities so nothing there that I am particularly concerned with… Unless there’s something I’m overlooking.￼