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Buying an apartment complex (16 unit property)
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Question:
I am buying my first apartment complex, a property with 16 units. I am a bit nervous about it. I am buying this on the retail market meaning through a realtor. What questions should I ask the realtor?Answer:
Here are a few important questions to ask:- Why is the Owner Selling?
- How long has the owner owned the building?
- When was the last time mechanicals were updated?
- Can the owner provide two years Schedule E's (annual tax declaration of rental income)?
- If he does not want to give you a copy of schedule E, can he at least provide a current rent roll and income expense statement?
Once you have the building financials you will have a lot more. If they cannot provide satisfactory answers to all of the questions listed above I would be a little suspect. Other questions beyond the rent returns are:
- How old are the units?
- What's the unit mix ( how many 1 br. 2 br etc)
- What's the vacancy factor in the area?
- What is the vacancy of the units?
- What are market rents in the area?
- Are there any other units in the area for sale?
- If so at what price?
- What are the going Cap rates in the area on multiple units?
- Have any other Units in the area recently sold?
- If so at what price?
- How much does the seller owe on the units?
- If there is a loan, is it assumable?
- Will the seller carry a second?
- Is there any deferred maintenance?
- If so, estimated cost of maintenance?
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