Inspecting a fully occupied 4-plex

I’ve always bought vacant SFR’s in the past, but am going to make an offer on a 4-plex that is fully occupied. Is there anything “special” I need to do differently? IOW, I’m sure the owner has a clause in his/her lease contracts that allow this, but not sure if there is anything else I need to do. Also, how much more would I be looking at as far as cost since it’s a 4-plex vs. an SFR?

You want to make your offer based on the rents of course so it will cashflow. If the unit has an income of $4000 a month, you want your mortgage to be in the $2000-2500 a month range if you plan on managing the property yourself. You want a PCF of at least $650-800 a month for the 4plex. So get your numbers, find out if landlord pays any utilities, view all the leases, find out about security deposits and close at the beginning of the month so you can the prorated rents back at closing…

Also the buildin itself will have an appraisal value. 4plex will appraise same way as a SFH, but of course rents come into play.

Just a heads up on that 4-plex, have the HVAC inspected by a professional. I have a triplex where all 3 almost needed replacement due to poor maint, caught it in time. You don’t want to run into a situation where the inspector just gives it a mild lookover and you end up with 4 hosed systems.

Some of i wil depend on what state you’re in. In Texas, inspectors are licensed through the Texas Real Estate Commission. The things that all inspectors must look for is pretty specific. A fourplex isn’t much different than inspecting a SFR. Most leases will have a clause that grants the owner the right to inspect the property given a certain amount of notice to the tenants. Some will say that they would rather have the tenants not be there. Personally, I like when tenants are there during an inspection because they tend to freely give out information about problems with the property. It works to my client’s advantage in the end. A typical home inspection should take 2-3 hours. However, inspecting a fourplex can take quite a bit longer depending on a number of different factors. An inspector should easily expect to spend most of the day inspecting a fourplex. Just notify the seller of your intent to have the property inspected. Ask him/her what the lead time is for notification to tenants. Ensure that the seller has keys to all the units, and ensure that the inspector gets those keys. This is important because tenants can be flighty. Even though you schedule an inspection for a day, and they swear that they will be there, often times they aren’t. You don’t want to have to get charged a trip charge for an inspector to go back out and inspect a property because they couldn’t gain access.

Lee Warren

Thanks everyone for your advise!