Income Property - Helpful Investment Suggestions
1. Frame Your Ownership
Are you buying for long term ownership and cash flow, or are you looking to buy and flip under performing
properties. Talk to a real estate agent (click here) about cash flow, capital appreciation, management and
ownership (type and pride).
2. Double Check The Numbers
Double check all rental income, deposits, third party contracts, taxes, insurance and variable expenses. Get
copies of all statements, RE tax, Insurance statements, Rent Roll and Deposits held by Landlord.
3. Join Your Local Apartment Association
Apartment associations are generally the best source for forms, pending laws, procedures, education and
networking opportunities.
4. Buying A Business
Owning an investment/income property carries great pleasure as well as many decisions. You are buying a
business; you have income, fixed and variable expenses, your residents are your customers. Move in/outs,
vendors and improvements.
5. Be Rational Not Emotional
An emotional purchase is not always the best investment. Pay attention to the numbers. Make decisions based on
your business plan, not your heart.
6. Negative Cash Flow
There are reasons to buy negative cash flow properties. Generally, purchasing an under performing property is
one reason. Exchanging (1031) to not pay capital gains you have earned over years of ownership. There is an
opportunity to turn around a rough property, over time the building will produce cash flow and great returns.
7. Do An Inspection
Inspect the property, books and records. Property; inspect all units inside and outside, hire a professional
inspector. Review the books; rent roll, rental/Lease agreements, third property contracts (laundry, plumbing,
etc…). Other records; request copies of RE Tax and Insurance Statements, copies of utility bills. Call the utility
companies and ask about yearly expenses for the property.
8. Estoppel Letters
Get information and or letters from residents confirming residency statistics. Compare with books.
9. Get A Bill Of Sale
Escrow can prepare a bill of sale for all personal property transferred with the sale. Items included appliances,
power and hand tools, and supplies on hand for operation of the property.
10. Adequate Insurance
Work with an insurance agent to make sure the property is adequately covered.
11. Treat Your Residents As Customers
Vacancies and turnovers are your largest expense. Don’t lose residents due to disagreements, try to work out all
issues and keep turnovers low. Treat them as the customer they are, how you like to be treated.
12. Select Qualified Residents
Avoid losing current residents by moving in to new residents that create havoc, because they were not screened
properly. Set solid resident standards from the start. Do thorough background investigations; employment,
banking, credit reports, check with previous and current landlord, eviction and criminal backgrounds. Yes criminal.
There are companies that provide these services and they are worth it.
13. Business Plan
Part of your business plan should include location, timing and approach to your acquisition. The day to day
operations include adjustments to changing market conditions. Evaluate general conditions of the timing of when
and the amount of rent increases. Increasing rents is part of the business; think it through prior to executing your
increases.
14. Reserve Accounts
Start with and build up a reserve account for the day a major improvement will be made. If your account gets large
enough, you can take extra cash flow that year or make a principal reduction on the loan.
15. Ownership
Decide early on how you plan to take ownership of the building, L.L.C., Limited Partnership, General Partnership
or as an Individual. Partnerships are for a group of investors and have special circumstances. Limited Liability
Corporation, L.L.C., is generally for a single asset, but limited the financial exposure of each investor to that asset
only.
We hope these suggestions and ideas are of value to you. If you would like some assistance from a Multi-
Family expert (click here) or call the office 760-690-4400 x118.
1. Frame Your Ownership
Are you buying for long term ownership and cash flow, or are you looking to buy and flip under performing
properties. Talk to a real estate agent (click here) about cash flow, capital appreciation, management and
ownership (type and pride).
2. Double Check The Numbers
Double check all rental income, deposits, third party contracts, taxes, insurance and variable expenses. Get
copies of all statements, RE tax, Insurance statements, Rent Roll and Deposits held by Landlord.
3. Join Your Local Apartment Association
Apartment associations are generally the best source for forms, pending laws, procedures, education and
networking opportunities.
4. Buying A Business
Owning an investment/income property carries great pleasure as well as many decisions. You are buying a
business; you have income, fixed and variable expenses, your residents are your customers. Move in/outs,
vendors and improvements.
5. Be Rational Not Emotional
An emotional purchase is not always the best investment. Pay attention to the numbers. Make decisions based on
your business plan, not your heart.
6. Negative Cash Flow
There are reasons to buy negative cash flow properties. Generally, purchasing an under performing property is
one reason. Exchanging (1031) to not pay capital gains you have earned over years of ownership. There is an
opportunity to turn around a rough property, over time the building will produce cash flow and great returns.
7. Do An Inspection
Inspect the property, books and records. Property; inspect all units inside and outside, hire a professional
inspector. Review the books; rent roll, rental/Lease agreements, third property contracts (laundry, plumbing,
etc…). Other records; request copies of RE Tax and Insurance Statements, copies of utility bills. Call the utility
companies and ask about yearly expenses for the property.
8. Estoppel Letters
Get information and or letters from residents confirming residency statistics. Compare with books.
9. Get A Bill Of Sale
Escrow can prepare a bill of sale for all personal property transferred with the sale. Items included appliances,
power and hand tools, and supplies on hand for operation of the property.
10. Adequate Insurance
Work with an insurance agent to make sure the property is adequately covered.
11. Treat Your Residents As Customers
Vacancies and turnovers are your largest expense. Don’t lose residents due to disagreements, try to work out all
issues and keep turnovers low. Treat them as the customer they are, how you like to be treated.
12. Select Qualified Residents
Avoid losing current residents by moving in to new residents that create havoc, because they were not screened
properly. Set solid resident standards from the start. Do thorough background investigations; employment,
banking, credit reports, check with previous and current landlord, eviction and criminal backgrounds. Yes criminal.
There are companies that provide these services and they are worth it.
13. Business Plan
Part of your business plan should include location, timing and approach to your acquisition. The day to day
operations include adjustments to changing market conditions. Evaluate general conditions of the timing of when
and the amount of rent increases. Increasing rents is part of the business; think it through prior to executing your
increases.
14. Reserve Accounts
Start with and build up a reserve account for the day a major improvement will be made. If your account gets large
enough, you can take extra cash flow that year or make a principal reduction on the loan.
15. Ownership
Decide early on how you plan to take ownership of the building, L.L.C., Limited Partnership, General Partnership
or as an Individual. Partnerships are for a group of investors and have special circumstances. Limited Liability
Corporation, L.L.C., is generally for a single asset, but limited the financial exposure of each investor to that asset
only.
We hope these suggestions and ideas are of value to you. If you would like some assistance from a Multi-
Family expert (click here) or call the office 760-690-4400 x118.
| San Diego Multifamily Checklist |
| Prestige Properties & Finance, a Real Estate & Mortgage Broker 2658 Del Mar Heights Road, Suite 207, Del Mar, CA 92014 Ph. 858-484-3446 / 619-568-3800 / 760-690-4400 :: Fax 858-484-3577 Licensed by the California Dept. of Real Estate. License #01153458 An equal opportunity Real Estate & Finance Company. All information deemed reliable but not guaranteed. |
| San Diego Multi-Family & Apartment Real Estate |
| Prestige Commercial Real Estate |
2-4 Unit Searches
Multifamily Buyer Checklist
| Aquisitions Dispositions Financing Exchanges |
| Or use this quick contact form to get started: |