Questions to ask a multifamily seller?

Question

I will be viewing a duplex soon and I want to make sure I am asking the right questions when I go.

The obvious ones that jump out at me are:

1. Why are you selling?

2. What are the current tenants paying in rent? And can I see payment history?

3. What do the month to month expenses look like for the property?

4. Are there any unpaid taxes or liens on the property?

Thanks in advance!

Michael Dumler · Answer

@Victoria Imlach all valid questions. I would also determine if the tenants have been paying on time and whether they are on a fixed lease or month-to-month. Question four, unfortunately, the seller may not even know. You may want to perform your due diligence when confirming if a property has a lien or not. You can simply check by reaching out to your county clerk's office and asking for the property's public records. Hope this helps!

Jon Kelly · Answer

What repairs were recently performed?

What repairs still need to be completed?

Do you own any other properties? If yes, are you interested in selling other properties?

I agree with @Justin Hoggatt, I think the question about rent collection is less important. However, I would still ask it because it may highlight a pain point for the seller. If the rent collection is poor it gives you an opportunity to lower your asking price.

Johnny Lynum · Answer

@Victoria Imlach You can also add this up: Who else other than yourself is involved with the decision of selling this property? The reason why the price is high (in case): The price he bought the property. (for reference)

Justin Hoggatt · Answer

Since this property really isn't "multi-family" in the sense that it's a commercial property, I don't think that the questions about rent collection and payments are as important.  Since it's a duplex, I'd be looking at it more from the market value, condition of the property, and location.  I think if you do some good due diligence on the condition (no major defects and/or deferred maintenance items) and look into the market including what the property can pull as far as rents go, you should be fine.  If there are low rents or bad tenants for the two tenants that are there, you should be able to increase the revenue quickly and easily.

Nicholas L. · Answer

@Victoria Imlach those are good questions, but given the current market condition, the seller may not need or even want to answer lots of questions.  If you're working with an agent, you won't be asking the seller anything; you'll give the questions to your agent, who will give the questions to the seller's agent, and at best you'll get partial answers back...

Unless this isn't competitive, or there isn't a lot of interest... then the seller might be more engaged.

Just trying to set expectations.

Jill F. · Answer

Have you had bedbugs in the last 12 months, if yes, who treated and when? In some counties/cities there are extra expenses for landlords like rental registration fees (our range from 0 - 100/year/unit), sewer fees for parking lot, or backflow testing.

Especially if you are new, ask who they use for snow removal, lawn maintenance, plumbing, cleaning, etc. (it's always good to have a list of possibilities).

See if you have local police reports online; ours are searchable by address

Get the account numbers for any landlord paid utilities and call the utility companies (here they'll give you average usage for the year, winter, summer)

We ask for tenant estoppels before closing so that tenants know we know how much everyone is paying and the amounts for security deposits to be transfered. Also, tenants can't later claim that they were promised this or that because they had a chance to write it down for the previous owner to sign on the estoppel.

You should get rent roll, P&L, Balance Sheet for property

We sometimes never meet the owner, everything is through the agents.

Jon Kelly · Answer

@Victoria Imlach you don't need a detailed list of everything that is done. You should just be concerned about the larger ticket items (e.g. roof, siding, windows, electrical, plumbing, appliances, flooring, etc.). By no means does all of it need to be recently renovated. Just adjust the offer price accordingly.

Victoria Imlach · Answer

@Jill F. great advice here and some thing I did not even think of. Thank you!

Victoria Imlach · Answer

@Nicholas L. I appreciate the honesty. And yeah I understand I won't be talking to the seller directly. I think it's going to be pretty competitive so doubtful I get most questions answered but worth a shot I guess

Victoria Imlach · Answer

@Jon Kelly repairs are a big one. I wonder how the seller would even be able to prove what kind of repairs they've done. I'll definitely be asking though. Thank you!

Questions to ask a multifamily seller?

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