Data-Driven Commerical Real Estate Multifamily Investment Decision

Data-Driven Commerical Real Estate Multifamily Investment Decision

The calculations that you’ll need to learn to succeed in real estate investing are not overly challenging, it is important that you master them. However, any calculations and projections you make will be worthless without good data as your input.

“Garbage in garbage out,” as the adage goes.

Good quality information is an invaluable commodity. It is hard work to make sure that the information is accurate and complete.

The guidelines below are, by necessity, somewhat general in nature. No two transactions are alike. Every transaction you analyze will have different amounts of information available for you to collect. For those investments that are tricky to research, just remember, you need to know what’s really going on. The consequences of doing less can lead to incredibly upsetting outcomes down the road.

Property-Related Data

When deciding on an income property, learn all you can about its income and expenses. You’re purchasing the income that the property generates not just the physical property. The beauty is in the bottom line. For this type of real estate investment, this information will most certainly be available indirectly through the seller’s agent or sometimes directly from the seller.

apartment syndication
, multifamily investing
, multifamily syndication investing, raising money for real estate syndication, commercial real estate multifamily investments

Ask to See the Leases

There are many reasons you should ask to see the leases. 1) If you decide to buy the property, you’re going to be subject to the terms of those leases; it’s an excellent idea to know what they say. More pressing than this, however, is 2) the question of the rental rates. You need to ask the following: Does the rental lease agreements align with the seller’s claims? 3) What is the period of each lease? 4) Do the tenants have the option to renew? If so, at what rates? These answers will have significant impacts on your analysis of the property and its viability as an investment.

Look at the Property Tax Bill

This is one way to confirm the accuracy of the listed tax expense, and it also allows you to see if the current owner has received any sort of tax abatement (a potential development incentive) that may expire or may not apply at all to a new owner. You should also look for evidence of a “phase-in” of a new assessment. Some cities, to mitigate the impact that the periodic reassessment of property values can cause, will choose to implement a further evaluation in phases. This would mean that although the current taxes are accurate, the tax bills are sure to increase as the original assessment is executed by the local government.

Spot-Check Utility Bills

The vast majority of gas, electric, and water companies will give you information if you call. Although not the most efficient way to collect expense data on a property, it can still serve a useful purpose – determining your ability to trust what you have been told. For instance, if what you find matches what the seller has told you, then you have a reasonable basis to believe that their other claims and documentation will also be trustworthy. On the other hand, if you discover discrepancies, then you can ask for an explanation. And even if what you uncovered turns out to be an honest mistake, you’ve served notice that you are not to be misled when it comes to truth and accuracy and the seller can respect you because you are doing your due diligence.

Ask to See and Analyze the Appropriate Sections of the Seller’s Tax Return

The vast majority of gas, electric, and water companies will give you information if you call. Although not the most efficient way to collect expense data on a property, it can still serve a useful purpose – determining your ability to trust what you have been told. For instance, if what you find matches what the seller has told you, then you have a reasonable basis to believe that their other claims and documentation will also be trustworthy. On the other hand, if you discover discrepancies, then you can ask for an explanation. And even if what you uncovered turns out to be an honest mistake, you’ve served notice that you are not to be misled when it comes to truth and accuracy and the seller can respect you because you are doing your due diligence.

apartment syndication
, multifamily investing
, multifamily syndication investing, raising money for real estate syndication, commercial real estate multifamily investments

Recite the Sections which Represent the Leases and Schedule of Rent Income in the Purchase Offering

The first step is to have an attorney check insert the proper language into your purchase offering. But, one thing worth considering adding to the offer is language that goes captures the essence of the following… “To date of this agreement, the seller warrants and represents that, the leases are for X amount and the expiration dates and renewal options are the day, month and year.” The second step is to ask your attorney to add “and that these warranties will survive the delivery of the deed.” If you can add to this language, it should give you great peace of mind. The first part means that the seller swears to tell nothing but the truth; the second part means that they are not off the hook if you only discover the lie after the purchase has been completed.

Leave a Reply

Your email address will not be published. Required fields are marked *