14 Unit townhome complex conundrum

[Jorge De Jesus]

Driving for dollars I found a 14 unit townhome complex with a for rent sign. I call the owner, asked if they would sell, they said they are ready to retire so yes! They stated their starting price; as I asked for financials they sent me their tax returns I asked if they have anything more specific to each unit and etc. They said they’ve never kept books on the stuff, they have these units and other units’ rents all getting paid into the same account so “we wouldn’t really be able to tell you what is performing at what rate or what vacancy we have at which complex because it’s two separate complexes”. Would I be able to dissect their tax returns which is all they have and knowing what the rents are find out how well these units are performing or is talking to their CPA going to help me in any way?(they offered me some time to go sit with him and meet with him and discuss it?)This is an older couple and they don’t really want to do much by way of providing the information. This would be my first actual investment and would love to get some partners involved but all I have as of right now is a lead

[Curtis Bidwell]

@Jorge De Jesus Congratulations!  These can be some of the best deals!  I helped talk a couple through a similar deal last year and they are killing it!  While it is helpful, You don’t really need their #’s, you need to determine what the actual income and costs will be for when you take over.  But definitely talk with the cpa this is valuable and a part of your due diligence.  

Research current market rents in the neighborhood for like size units # of beds/baths, parking, yard, etc).  Talk to neighbors (landlords and tenants) to find out what they pay/charge for rent, utilities, pet fees, etc..

Talk with utilities to get last year or 2 of actual expenses.  

Check with county assessor to find out actual current property taxes.  

Talk with local management companies to confirm rent rates, find out local vacancy rates, current management fees (you might find one you like to manage it for you!). 

Get insurance quotes.

Find out when they last replaced hot water tanks, roofs, heaters, etc..

With the info you gathered determine if it makes sense based on the price.  Their price may be a good value to you despite deficiencies or deferred maintenance, or it may be inflated based on current market.  Talk with a couple lenders to see what they are willing to do for you.  

The seller may be willing to carry the contract for a couple years to let you make improvements and get rents up to market so you can then refinance.  

Don’t delay! Get right on it so they know your serious, and stay in close communication each step of the way so it doesn’t get away from you! Good luck!