Purchasing a small multifamily property can be a bit frustrating, but it need not be. All of it depends on your expectations and approach to the process. By small multifamily properties I mean anything from a duplex, triplex, fourplex or quadplex to medium sized properties like 7,12, 15 units: basically anything that’s a small business rather than larger complexes which tend to be managed in a more business like manner.
That last sentence should have given you a clue about where I’m going with the. Most small income property owners don’t run these properties like a business and even if they do the have their own way of doing it. Let me give you an example. A recent purchase of 2 fourplexes meant dealing with some lady that kinda managed the property for the owner who was out of state, but she did not even have a real estate license and she did it for free as a favor. Well guess what, there were no leases, she did not even take applications or inventory or give the tenants the required lead based paint disclosures etc. No one knew what the deposits were either. This was a hard one. Another situation included tenants that had their own appliances, but this was not in writing. These are just a few of the quirks amongst many that come up, some graver then others.
When purchasing these properties be ready for these quirks, be ready that the business is not the way you would run it or the way you will run it.
My assumption is that i’m buying a property that is vacant rather than one that is leased. Of course leases are important because you have to be with those tenants for the remainder of the lease, at least, but I do my numbers based on the market, I look at what I want the property to be for the long term vs what is is now and what it was. I do my assessment based on that and dismiss the nuances of current ownership. No dogie lease, no problem. No deposit on the lease, no problem. Who owns the frig? I don’t care because the way it looks I’ll probably change it anyways. I can new beautiful frig for $800 or a decent used one of $250 or I have a storage of abunch of fridges I picked up at $75 each when some government agency was redoing some places. This is a small deal.
Imagine two cogs that begin to meet each other and they are not tuned or timed right. There is going to be some grinding involved: add some additional grease and start tuning. If you see that one cog has square teeth and the other round then maybe it’s not the right property for you.