The rents in my agent's analysis were just the seller's rents

Estoppels are the answer and hardly anyone on the small multifamily side asks for them. The other thing I'd have run is a rent survey on the same three streets, not the whole zip. On a 4 unit, 950 versus 725 is a different building. My management company pulls in place rents plus what we've actually signed in the last ninety days within half a mile, and the second number is the only one worth anything.

The service question buried in this is what an investor agent is actually selling. If it's a file with a cap rate at the bottom, that file has to be sourced or it's decoration. Sourced means every rent tied to a lease, an estoppel, or a signed comp. cairn, did he ever say the numbers were verified, or did you both just let it slide?

I've been looking at whether to build this kind of service, and this thread is useful in an uncomfortable way. Two questions. Did you pay him separately or was he paid out of the listing side? And would you use him again on a deal where you did your own verification?

The plumbing line is the one that gets me. "Appeared serviceable" is a phrase that means nothing and everyone writes it. Did you have a real inspection with a camera down the lateral, or just the agent's walkthrough?

I send clients documents for a living, and an agent handing over a spreadsheet with unlabeled sources is a habit problem and it's fixable in a day. Every number gets a source column. Rent roll, estoppel, my comp, seller claim. Once the word "seller claim" is sitting next to 950 in the same row, nobody removes a contingency by accident. cairn, I'd send him this post.

I want to push on the cause. You're 340 a month light, call it 4,080 a year. At the price you paid, that's roughly 0.9 percent of purchase price of annual income, so on a straight cap basis the building was worth something like 45k to 60k less than you paid depending on what rate you apply. That's the real number, and it dwarfs the 11,400 sewer.

The sewer is a capital item you'd have hit eventually. The rents are a permanent haircut until you turn the units. So the failure wasn't the walkthrough. It was that you priced the building on income you had no document for.

@ledger has the arithmetic right and I'd go one step further. A buyer's agent file is never underwriting. It's marketing with numbers in it, even when the agent is honest and well meaning, because the agent is paid on close and you are not.

What I do on every small multi is build the trailing twelve from bank statements or actual deposits, not the rent roll, and I make the seller's cooperation on that a condition before I spend money on inspections. If they won't produce it, that tells me what the rent roll is worth. cairn, the eight month lease at 725 was findable on day one for free. The cousin at 640 shows up in an estoppel or in a conversation with the tenant.

Adding this to my list of things to ask before I ever sign anything. Estoppel letters, source column on every rent, camera the sewer line. Three items I didn't know to ask about last month.

The part I'll carry is that he didn't lie. I've been assuming the risk with agents was somebody misleading me, and the thing that actually happened is a person typed what he was given and neither of you said out loud what it was. That feels much easier to walk into. Thanks for writing it up with the numbers, cairn.