Fantasy Rent Numbers
Hello,
I will be buying a few multiunit properties in SE Ohio and in W. Virginia. I am looking at the rental numbers I am being supplied and I am skeptical of their accuracy. I have not seen any of these properties yet I am getting the numbers from the agent who is getting them off the MLS. I will be visiting in 2 weeks for about a week. What techniques do you use to decide if you are being fed real numbers or "Fantasyland rent numbers"?
Thank you :-?
Talked to a buddy today, he said to talk to a property manager or 2 and get their perspective. That sounded pretty good.
You will be making contact with the seller / sellers agent yourself, or through your buyers agent to perform your due diligence.
Some initial questions for them? Have the bldgs been kept as a separate business entity ? If so, separate checking accts, tax returns, other records ? It is normal to request / provide these records. They will show rents, expenses, etc. over the past two years or more. Not just promotional financials. Do a title search, liens, code enforcement actions, environmental, asbestos, aluminum wiring.
I said "request " the real financials, you may get them. You may have to sign a contract to purchase, earnest money, verification of funds contingent upon getting bank statements, tax returns etc. Ask if they are available first. You typically have 7 - 21 days for your due diligence. It can be mutually extended if negotiations are moving along.
If the financials are in a shoe box, thats not good. Done by a CPA is good. You start to make some judgements. You can use a buyers agent that is experienced in multi family / commercial transactions. They will know all about how this is done. Your buyers agent gets paid buy the seller most times. Your real estate attorney assists also.
There are many contingencies (escape clauses) that can be included in your offer to purchase so you can walk away with your earnest money. I hope some others will contribute in this area.
Hope this helps.
I am always very skeptical of what people say the rent will be on a vacant property. I have always trusted my gut, mainly because I only buy in markets I am familiar with. The two times that I let my property manager decide the rent, I was very surprised by the high amount. Both times they sat vacant until I dropped it to what I thought it should be and wammo it gets rented. Just think of real estate agents, property managers, and everybody else as advisors. They advise but the decisions are www.yours.It is ultimately up to you to do the due diligence and decide what a fair rent is. GOOD LUCK and dont let real estate consume your week off.