All Forum Posts by: Heeyeon Chung

Is it on the contract that is has to be provided? They are definitely hiding something here, I would think worst case scenario on current rents and expenses and see if it's still worth it. 

Small multifamily (40 units and under) often have no records, bad records, unreliable records. It isnt going to be any better with other properties in this segment of the market. 

You can go unit by unit and get estoppels signed by the tenants. This will get you to at least what the gross rents are. 

Lots of good advice above... echoing what everyone else has said, I'd recommend doing A LOT of due diligence on the ground level here to find out exactly what's going on with this property. Typically I like to include what is required of the seller in a due diligence docs clause of the contract, including rent roll, T12, estoppels, utility bills, etc. Whether or not you had all that in the contract is irrelevant now however, if the seller is being uncooperative. They would just be in breach of contract and you'd have the option to terminate and get your EM back (which is probably what I would do here unless this is a really, really good deal even when running numbers using a worst-case scenario # on the unknowns). I'd reach out to the listing agent one more time and let them know that if they can't help with your due diligence requirements in good faith through the proper channels, you'll be knocking on doors to get what you need or simply terminating the contract. Then I would try to get estoppels from the tenants, call the local permitting, zoning and police departments, knock on neighbor's doors, talk to local PM's, commercial brokers who know the neighborhood really well, etc. to see what you can uncover. As far as financing, I'd contact a local credit union and see if they can work with you on it. I have a great one that would take on something like this based on pro-forma numbers (if they work obviously). They know almost every property in our area and if they don't want to lend on it, I don't want to buy it anyway.

@Heeyeon Chung We just purchased a MFP with a similar situation. We proceeded with the purchase because we know what kind of profit the property will bring under our management plan and the profit margin will be great. 🙂

Just my opinion from what you have provided, but I would walk, no RUN, away from this. It's in the middle of a huge nightmare and you and your partners will be sorry the minute you take possession! 

You'll be investing so many hours, days, weeks, even months in getting financed. I dont think there are many underwriters willing to walk the plank on this one. 

It might help if you could do a face to face with a couple of the occupants. Also look into the history of the property which should be available from the assessor. Any crumbs of facts you can collect will help. How many times has the seller had to evict tenants? Maybe the sheriff has some knowledge. How about chatting with the USPS delivery person? They know about daily/weekly activities at a property. Has the bui.ding commission issued permits for contractors to do repairs to the property in the last 10-15 years? Wishing you luck but warning you to dig deep for the truth of this deal.

If you plan to operate or ever sell as a MF property, the zoning is a deal breaker.  The only way to purchase this property is contingent on a zoning change...or to get a massive discount that any future buyer would also expect due to the inability to get financing.  Forget about documents...zoning is the real issue.

I would use a Hard Money/Bridge Loan that finances renovations.... get everything in order and rehabbed, take time into consideration and then refinance at the time you're done with a new value.  

Hire someone to door knock if you are not local. Speak with every tenant, take names, phone numbers, notes on what they do or don't pay. Half will be untrue. I can recommend a company if you need one, or get your agent to do the interviews.

Probably unable to get a conventional loan even if the motel is legal nonconforming. What does city/county planning say? Red tagged? 

Location?

Sounds like transitional housing??? VERY HARD to MANAGE you need onsite manager, cameras, security

@Heeyeon Chung ever hear the idiom 'pig in a poke' this is it. I think you are being set up since no one is forthcoming, and they are hoping you will go through with the purchase without looking under the covers. Sounds like there are too many risks here before you even get to the tenants! All the best!