uncertain financials

[Alex Flowers]

I've posted once or twice about a small apartment complex. The building are in good shape, new metal roofs, the location is a growth area, a large part of the lot is undeveloped, never a vacancy, very good intangibles.

The problem is that the owner has no record keeping ability. He does not have any way of accounting for his revenue and expenses for the last several years. He is in his mid 70's with an ailing wife, so I know receipts were the last thing on his mind. The only ones he know for sure are the utilities, taxes and insurance. He does most of the maintenance himself, although a couple of tenants told me it is not very prompt. He knows his rent rates, but can't/won't verify rents being paid. I believe he's had trouble in the past selling this property, as I know it sold 4/5 yrs ago and he carried/foreclosed after 18 months. It's also been under contract about 6-8 months ago.

I have pro-formas, a good looking, full property, a good location, a semi-motivated seller, a good rapport with the seller, plus some interesting financing options.

If someone with any insight could reply or PM me I can discuss the specific numbers.

[Adam Johnson]

This brings up a way to leverage information (or lack of) instead of cash.  I like doing this type of deal because it scares away a lot of competition, meaning that a motivated seller has to negotiate with ME, because I might be the only one to negotiate with.

You will need to build your own realistic pro-forma, plug in percentages if you don't have actual expenses. Use your best estimate of CURRENT rents, even if they are below market.  Use that to determine todays value,then discount the offer price to account for all of the unknowns.  You will likely uncover a lot of deferred repairs after you own it.

Roll your sleeves up and get your hands dirty on this one, it might prove to be worth running it through the calculator!  Don't overpay for it, you may have found the end of the rainbow.  DO NOT BUY BASED ON FUTURE VALUE!  This could prove to be a very good deal for you if you buy it right.  Turn the lack of information into a way to "sell" your lower offer.