What questions to ask agent on multi-units (5)?

Question

HI,

I am new and want to analyze some multi-units properties.

i noticed all the agent list is the following:

Sale Price: $1,100,000

3,931 SF | $280/SF

number of units and bed rooms and bath rooms.

Do I have to call them up to ask for all rental incomes and expenses?

If so, what kinds of questions should I ask to ensure I would not miss all the items?

Any advice will be appreciated.

Randy

Josh Prince · Answer

It is my experience that you or your agent can get the set up - i.e., rent roll and P&L with a phone call to the listing agent.  Leases, estoppels and a walk through will require a signed contract, but the basic financials are often given away if not provided in the listing.

Hank Fields · Answer

Eric is right, and makes great points.  I am a property manager in Los Angeles, and as he wrote, you should be able to look at current leases to see what tenants are paying.  Or at least the rent roll.  But here in LA, the leases automatically go month-to-month after 1 year.  Sometimes, the uptick in rent is not always on the lease due to that reason.  It is simply a rent increase letter, they accept, and continue paying, with no need to update the lease.  That uptick should be in the rent roll.

1.1 million for 4k square feet...sounds like LA prices...the prices out here are crazy...The cap rates on purchases here are so out of whack that it doesn't make sense for any "small-time" investor to purchase.  Ex:  There's a 2900 sq. foot duplex around the corner from where I manage that is going for $975K...it's in a nice area where Studio City meets Toluca Lake, but come on...almost a $1 million for Duplex...they are selling for land value for investors to tear down and rebuild or someone with cash because that price just does not make sense for someone who wants to finance a deal...there's a lot of that going on all over Los Angeles.

For what it's worth...I've seen substantial increases in rents in Los Angeles since 2012.  My wife and I used to manage a building in Sherman Oaks.  The 2+2's in that building were renting for $1595 then...when they go vacant now, our management company is pushing for close to $2k month...I've seen rent increases on vacant units at the properties I manage in the past year go from anywhere from as low as 5% in one year to more than 20%...one building where I go to help out, there's a vacant unit that the owner is pushing for an increase in rent of around 15%...there's a myriad of factors involved with these increases, but suffice it to say that rents in Los Angeles are getting very high...

Aaron Montague · Answer

@Randy Fung

Welcome to BP!!

Check out the 1% rule.  The first question I'd ask on a $1.1M property is:

Does the place make $11,000+ per month in rent?  If it doesn't, and you are looking to make an investment out of it, move on.

Randy Fung · Answer

Thank you every one for your great advice.

Randy

Ned Carey · Answer

Any agent that doesn't provide that in the listing is a

Moron! ! ! !

No one can possibly even consider an offer without it.

Yes you need to find out the basic financial info. Your offer should include a due diligence period to confirm the income and expenses.

Eric Black · Answer

Hi Randy,

Typically on multi-family, and sometimes on all investment properties, the "rent roll" will be given to any potential buyers once they have submitted an offer. This is simply to prevent giving out financial data to all of the window shoppers. You will typically have a deadline in your contract for the seller to provide you this information and give you time to review it. It's called "rent roll" but will typically also include all maintenance expenses, etc. You can also request copies of the current leases.

If the seller is unwilling to give you these, be very cautious. We were recently in contract on a property and the seller gave us a useless documents that claimed to state the current rents. The property management company also said, "There are no leases." We immediately cancelled the contract and got our EMD back.

You can ask for pretty much anything as far as documentation goes as part of your offer but you have to be realistic too. They should be able, and willing, to provide you at least 12 months, if not 24 or 36 months, of past income and expenses. If they're not then there's reason to be suspicious and concerned.

Best of luck!

Eric

What questions to ask agent on multi-units (5)?

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