Under contract on a 4-unit 500 miles away and I have never seen the building

Text campaign turned up an owner of a small 4-unit in a market I've never been to. Two units occupied, two vacant, he says the vacants need paint and one needs a tub surround. He wants $185,000 and he'll sign this week.

I put value at $235,000 to $250,000 based on listings I can see online, but that state is one where sale prices aren't public, so I'm working off asking prices and a rent roll he emailed me as a photo of a piece of paper. Rents on the two occupied units are $725 and $760.

My plan is to get it under contract with a 14 day inspection window and assign it. I have two buyers in that metro who said "send me anything under $200k" on a phone call, which I am aware is not the same as a commitment.

The thing on my desk is the walkthrough. Flights are about $400 plus two days I'd rather not spend, and I own small multifamily here so I know how much a photo hides. Options as I see them: fly out, hire a local inspector for maybe $450, or find a contractor to walk it with video for $150ish.

I also don't know who is supposed to let that person in, or whether asking the seller to arrange access makes me look like I don't have my act together.

Answer

1karen_whitfieldPG4APRO7

Don't fly. Hire two people, not one.

The $150 contractor with a video walk is for you, so you know whether the roof and the mechanicals are going to blow the deal up. Have him narrate on camera and open every panel and every access hatch. That video is also the thing you send your buyers, and a walkthrough video does more to get a real offer out of someone than any photo set.

The local agent is the other person. In a non-disclosure state your comps are guesswork without one, and an agent will usually pull them for free hoping for the listing later. That converts your $235k to $250k range into something you can actually contract against.

On access, call the seller and say you're sending someone to look at it Tuesday, who should let them in. He offered to sell you a building, he expects that. Ask him to be there himself if the tenants are the awkward part, because you want a tenant conversation on video too. Occupied units in a small building are where the surprises live.

The $400 flight buys you a feeling, and a feeling is the one thing you already have. Spend $600 on information instead and keep the two days.

5 replies

1angela_burkeServicePRO6

Asking the seller for access doesn't make you look amateur, it's the normal thing. What makes you look amateur is showing up with three different people over ten days because you didn't plan the access once. Schedule one visit, get everything done in it.

Also, whoever walks it should be told to photograph the mechanical room, the water heaters, and the panel before anything cosmetic. Cosmetic is what the seller already told you about.

1Rena Expert

Two structural points about the deal as described.

The rent roll photo is the weakest document in the file. On a 4-unit with two vacancies, your buyer's value is driven by what the occupied units actually collect and whether those leases are real. Ask for bank statements or deposit records covering the last several months and copies of the signed leases. A seller who won't produce either is telling you something. Your $725 and $760 figures may also sit under market, which helps a buyer, or over it, which kills the deal at their underwriting stage.

On value, working from asking prices in a state that doesn't publish sale prices means your $235,000 to $250,000 is an estimate with wide error bars. Roughly a dozen states are non-disclosure like that. A local agent can usually pull closed comps from the MLS, and getting that from someone licensed in that market costs you a phone call.

The inspection window is doing the real work here. If the 14 days runs from signing and your access takes nine days to arrange, you have five days to underwrite, get a buyer to commit, and paper the assignment. Tie the window to the date access is provided, and confirm the assignment language in your contract is enforceable in that state, which is a question for an attorney licensed there.

The assumption your plan rests on is that "send me anything under $200k" converts. Before you spend anything on travel, ask both buyers what they'd pay for this specific building at these rents.

2ehernandez74PO2BPRO5

@orchard the two-person split makes sense to me. Question for cairn though, what happens if the contractor finds $30k of work and both buyers pass? Do you have a clean way out inside the 14 days, and does your contract actually say so in language that state honors? I'd want that answered before I signed anything, and I'd want a lawyer there to read it once.

1nataliehsuSO1BPRO7

Reading this thread mostly to understand what the local person is being hired for, and it's clearer than any course description I've seen. $150 for a narrated video walk sounds like a service somebody could build in a small market.