What are the top 3-10 questions that other investors ask to help them with their investment buying decisions and research. and I also can now ask myself to help me in my investment buying decisions

The objective being of course using available data that realtors have at their disposal due to heavy experience about certain areas they are familiar with

1.Does the broker have the specific expertise in the area and asset class you are looking to acquire?

Each asset class (residential,commercial,land investment,retail,office,industrial and all the subsets of each main category have their own specific investment criteria).

When an investor calls me and tells me they want to buy SOMETHING I know they are green.

A seasoned investor tells me what asset class,what price range,what area,and age and returns for the product they want.

What should I get from seller,(profit and loss) on the purchase of a 6 family apartment house?
The numbers provided don't seem to add up. I've asked for a Schedule C but so far have heard nothing from the other broker. I think the broker is stalling so they can sell it through their office, rather than mine. My buyer wants the info before she head to the bank.

I don't trust the numbers of any seller. Not that they are misleading, but it's best to have your own projections. If the property is occupied and the sellers numbers are wrong, the buyer will then need to make rent adjustments to the current tenants. Investors should do their own homework. It's better that way. If the numbers don't seem to add up, they probably don't.

I agree with BigPat. Investors need to determine fair market value of each unit in a multiplex by conducting local market research. Sometime there is a special agreement between a current tenant and the landlord that could make the current rent optimistic. For example, one tenant could have utilities wrapped into their rent, while another does not. Do your own research, and don't be caught off-guard.

You have to figure out your cap rates. Take the six unit. Figure out what each unit rents for in that area. Don't worry about what the current tenant pays. Then subtract all of the things that go along with the building. Taxes, how much to maintain it(this should include fresh paint every two years or so, appliances in case they break down and so on), vacancy probability(figure bare minimum 1 month per unit), snow removal and lawn care, all the expenses you need to figure out yourself. Once all of that is done you have a much better idea of how much you will actually net as compared to most of the "fluffed" numbers everyone else gives you. Figure out what it comes out to as a percentage and that gives you a cap rate. Most investors won't but anything with less than a 12% cap rate. Anything above that shouldn't be a problem to sell.

Apartments trade all the time below 12% CAP rates.It depends on the location A,B,C and the age A,B,C,D.

If you have cash you can look at all opportunities.If you are getting conventional financing you will be limited to long term occupancy properties who will want top dollar.If you use situations where you have private lenders the interest rates are higher say 8.5 to 9 percent.

The problem in this scenario is that your higher interest rate eats up your cash flow with the mortgage debt service.Then to justify the purchase you have to offer hundreds of thousands lower and the seller sells higher to regular buyer who can get financing at 6 to 7 percent.

Generally on 6 units the sellers self manage most of the time.If you do not want to manage yourself or are out of state you need to factor in the management fee.Even if you still manage yourself it will cost you in TIME and TIME is money in this business.

Typically property management fees run 5 to 10 percent.For a small 6 unit usually it will be 8 to 10 percent.This is why investors tend to buy larger units at 50 or more at a time because you can then get a 5 percent PM rate.

MA broker does your buyer have Proof Of Funds??? I ask for it before I release data along with a confidentiality agreement.Many investors will say they can do x,y,z but fall short and you waste time with your seller.By having requirements you weed out the buyers who CAN purchase from those who want the deal and WANT to purchase.

A down and dirty quick 10 second calculation goes like this.

50/50 rule

30 percent operating and expenses
10 percent vacancy/loss tenant turnover
10 percent property management fee

So if you have 6 unit at 800 unit currently.

800 X 6 = 4,800 month
4,800 X 12 = 57,600 (Potential Gross Income)
57,600 divided by 2 = 28,800

10 CAP = 288,000 purchase price


You would also look at capital improvements needed which can take your CAP down after you buy with high upgrade costs as well as if utilities are paid by landlord or sub-metered.

You have to watch out as a value play with older buildings is to sub-meter and start charging tenants utilities but if it's an area where all landlords include utilities then it's a waste of time to change.

I look at apartments all the time and many are way overpriced or the PM company got occupancy up in the last 60 days with free rent and concessions and are trying to drive the numbers up for a higher price.

If you show POF and they don't want to show schedule E's RUN AWAY unless your buyer has cash and then you can low-ball them to compensate for the risk and bad numbers.If they baulk move on.Time is on your side this is an investor market where CAP's are going up and prices are sliding.

would these be general guidelines or mainly applicable in the US?

Super, if we can reverse this question: What questions does a Realtor ask an investor? I was asked by a commercial investor to help him find properties for his buyers. I appreciate all responses.

Well first you have to know your market to understand if the investor is chasing a pipe dream or not.

For example:Investors say they are looking for Class A shopping centers with 10 CAPS going in for 50 cents on the dollar with anchor tenants (Kroger,Publix,etc.)

The problem is all of these cash funds are looking for that and it might be 1 in 5,000 out there.Those leads go to the bottom of my pile.

The next question: Is the investor a DIRECT PURCHASER? Meaning they are not some person who can't buy squat just trying to lock the property up as a middleman and collect a fee.

Most sellers and banks won't mess with these people.The reason is the banks do not know the capability of the C buyer they are trying to assign to.The banks would rather not go into contract and instead wait for a direct buyer.

For the investor you need a signed NDNC (non-disclosure/non-circumvent) agreement. The best way is to list the property as they know they can't buy pass you.I get as many listings as possible and then work with a tight group of buyer investors that I trust.

Thanks Super.

The one that I'm working with now says he has a lot of buyers that are looking for investment properties. Is there anyway to tell if an investor is legitimate?

What asset class??

What is the acquisition criteria??

How will they try to structure a deal?? Owner finances all,owner holds second,private financing,paying all cash,conventional finance,hard money,etc.

Are they a REIT or a SYNDICATE for investors?? Is this person nothing more than middleman with no money or are they managing capital they must deploy on behalf of the investment group.You want to deal with whoever pulls the strings and makes the buying decisions.

If not you will be dealing with a bunch of chains and middleman trying to collect a fee.Then there will be so many hands in the pot the deal won't work on any level and you have waster your time.

If they are paying cash have them show you a bank statement with proof of funds valid within the last 30 days.