Key Questions to Ask for Qualifying Multifamily Deal

What are the key questions you should ask yourself to analyze a multi-family deal. And in order to obviously by a deal you’re going to have to know these answers to the question. So here we go in order one.

How did you find the deal? Is it a non-market deal or an off-market deal on Market?

Okay, you’re going to be in a competitive bid situation you can. Get good deals that way but know that the price can be driven up from the competition off-market deal.

That’s something that’s worth looking into further for sure. And the reason why is pretty obvious, right? It’s not going to be a competitive bid situation.

So, you’re going to have a direct line to the seller and you might even be able to do more creative financing.

So that’s number one number two. Why is the seller selling? You’re going to hear a story from the cell there. They’re going to tell you why they’re selling it probably won’t be a hundred percent accurate, but keep asking the same question and eventually you’ll hear enough common things and that will probably lead you to some semblance of what the truth actually is. So why is the seller selling number three?

Do you have all the necessary information to evaluate? And what you need to evaluate is at least the trailing 12 Financial. So that’s the profit and loss statement from the Last 12 months, that’s one thing too. You’ll need the rent roll the current rent roll because that’s going to show you what they’re getting for the apartments at the renting out right now.

And then if it’s on market, then you’ll want the offer memorandum which is the package that the broker fits together, but at least have the trailing 12 financials ideally the trailing 24 financials and the current role without that you won’t be able to evaluate the property.

For what is the upside? It’s important when you’re buying a multi-family that you know how you’re going to add value to the property 90% don’t come in with that percentage out of thin air, but I would I would guess that 90% of people are buying multifamily properties because they’re trying to add value to it and I’m guessing that that’s what you’re wanting to do, too. So, if you’re wanting to add value, then you got to know what the upside is. For example, you’re going to put In five thousand dollars a unit increase rents $75 that’s a good upside potential.

And so, then you need to know what exactly you’re going to do to create that value through those upgrades and that the market can actually command that type of red premium number five.

What’s the onion? What’s the Noy when you underwrite the deal not the broker performant pro forma. So, make sure that you’re on your writing the deal.

Along with your property management partner to make sure that they agree with how your underwriting it because it’s one thing for you to come up numbers. It’s another for them to actually validate those numbers based on their knowledge of the market number 6.

What’s the market cap rate number 7. What is the value of the property based on the no and the market cap rate number eight? Can you exceed the goals of your investors now? this is assuming that you’ve got investors.

In the deal, so can you exceed the goals of your investors?

Wow, making sure that you receive the compensation that you need. So, you got to know what the goals of your investors are and by the way on the cap right stuff that I just mentioned a second ago. It’s important to know what the entry cap rate is so that you’re buying competitively but more importantly it’s important to project as accurately as you can with the exit cap is and that’s a science and an art and that’s a whole nother.

Conversation number 9 on a scale of 1 to 10 how well do you know the area? It’s all about knowing the market knowing the sub Market knowing how good the schools are all those things.

So, you’ve got to know the area. You got to have team members who know the area really? Well in order to do well on your business plan number 10, who are the all the local team members that you have in the area.

Do you have local team members in the area? If so, then that’s great and have they implemented the business model that you’ve implemented before that’s really important too because one thing have great team members.

It’s another to have team members who haven’t done this type of deal before so you got to pay attention to that and lastly question number 11.

What type of financing is on the property right now?

So, you got to know is it assumable own? Is it a non-assumable? Do you ever get new financing if it is assumable?

What are the terms and you’ve got to know what type of opportunities you have from a debt standpoint to do to put on the? property you going to do a bridge loan to long-term financing or you do long-term? Those are the key questions to ask!