Questions to Ask When Buying a Multifamily Property
A building with tenants in it comes with their leases, its bills and its boiler as well as its walls. These 61 questions to ask when buying an apartment building, or a house of two to four units, run in the order a purchase does: what to ask at a multifamily house showing, then rents and leases, running costs, the building itself, rules and records, and price and closing.
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The questions
Each question, and why to ask it
At the showing
Which units can I go inside today, and when can I see the ones that are closed?
Why ask it
A showing of a multifamily house often covers one empty unit and the front hall, because the tenants in the others are owed notice. Find out which doors stay shut and why, and treat every unit you have not walked through as unpriced.
How many legal units does the building have, and does that match the kitchens, meters and mailboxes I can count?
Why ask it
Do the counting yourself while you are there: doorbells, mailboxes, electric meters, gas meters. Four units on the listing beside three meters and a kitchen in the basement suggests one unit may not be on the town's records, and that bears on the loan, the insurance and the rent you can rely on.
What is each unit renting for today, and which units are vacant or month to month?
Why ask it
The answer given on the spot is enough to decide whether the building earns a second visit. Write each figure down as it is spoken, since you will set those figures beside the rent roll and the leases later and the differences are worth a follow-up.
Does each unit have its own furnace or boiler, water heater and electrical panel, and may I see them now?
Why ask it
The basement says more than the staged unit does. Whatever the units share is a bill the owner pays, so note what each one has to itself, read the dates on the equipment labels and photograph all of it for a contractor to look over before you pay for a full inspection.
Who lives here now, and how long has each household stayed?
Why ask it
Tenancies of many years point to a building people are content in, and they frequently come with rents well under the going rate. If every unit has changed hands in the past year, the next thing to find out is what drove people away.
Does the owner or a relative live in one of the units, and will that unit be empty at closing?
Why ask it
An owner's unit pays no rent today, so the income on the listing sheet may include a figure nobody has ever paid for it. If you plan to live in the building, this is usually the unit you would get, so judge it as your own home as well as a rental.
Is there a second way out of every unit, and what shape are the rear stairs and porches in?
Why ask it
Upper floors in older multifamily houses often depend on a back stair or a stacked porch as the second exit, and those wooden structures sit out in the weather. Walk them yourself and look where the posts meet the ground. What the code requires of a building this age differs by place, so the building department is the one to tell you.
Who cleans the hallways, stairwells, basement and yard, and what is being stored there?
Why ask it
Shared space shows how a building is run: bikes on the landing, a basement full of things left by tenants who moved out long ago, bins that overflow by midweek. The condition on the day of the showing is the standard the current residents have come to expect.
Where does everyone park, and is each space written into a lease?
Why ask it
Count the spaces against the units and find out who uses which. In a dense neighbourhood a space can carry rent of its own, and a handshake arrangement between two tenants becomes yours to referee from the day you close.
Has water come in anywhere: through the roof, the basement walls or around the windows?
Why ask it
Ask, then look at the top-floor ceilings, the cabinet under each sink and the foot of the basement walls. In a stacked building a leaking bathroom damages the unit beneath it too, so a stained ceiling should send you upstairs to the room above.
Rents and leases
May I see a current rent roll showing lease dates, rents, concessions and delinquency by unit?
Why ask it
Unit by unit detail exposes what a summary hides: a cluster of leases all expiring in the same month, three units rented well below the rest, or a resident with a growing balance nobody has acted on. A larger owner can print it straight from the management software, and with a small landlord a handwritten list set against the bank deposits does the same job.
May I read every lease, with its addenda, and is anyone living here without one?
Why ask it
The rent roll is the seller's summary, and the lease is the document you would be bound by. Read each one for who pays which utility, any option to renew, repairs that were promised and a rent fixed below the market for years. How existing leases carry over to a new owner is set by local law, so confirm it with your attorney.
Can you send the last twelve months of income and expenses, broken out month by month?
Why ask it
Annual totals smooth out exactly the things you need to see: a winter heating bill, a month of high turnover, a repair that has been reclassified as capital. Twelve columns also let you spot expenses that stop appearing a few months before the listing went live.
How many units are occupied today, and how much of the scheduled rent actually gets collected?
Why ask it
A building can be nearly full and still take in far less than the rent roll total, because of a free month given at signing, a model unit, an apartment the superintendent lives in and two residents who have stopped paying. Brokers call the two measures physical and economic occupancy. You want both, with every item in the gap between them listed.
How much rent is owed right now, how old is it, and are any evictions under way?
Why ask it
An aged receivables report separates the resident who is ten days late from the one four months behind. If a case has been filed, get the attorney's name and the next court date and find out what a change of owner does to it there, then settle in the contract who keeps whatever is collected after closing.
What security deposit is held for each unit, and where is that money kept?
Why ask it
Deposits belong to the residents and normally come across to the buyer as a credit at closing. Whether they must sit in a separate account or earn interest is set by state or country, so have a local attorney explain how it works there, and check the deposit list against every lease.
What did the most recent new leases sign for, and how far below that are the rents being paid now?
Why ask it
This gap is the upside most sellers price into the asking figure, so you need to know whether it is real. The signed leases themselves, with their dates, are the evidence, because the rent a broker says the market supports and the rent a resident actually agreed to are often different numbers.
How many residents renewed last year, and what increase did they accept?
Why ask it
Renewals are the test of whether rents can go up without emptying the building. An owner who has not raised a rent in years has never run that test, which makes your business plan the first experiment.
How many units turned last year, and what did an average turnover cost?
Why ask it
Each move-out costs paint, flooring, cleaning, sometimes an appliance and a leasing fee, plus the weeks the unit sits empty. Get that total per turn, because a projection that raises every rent and assumes everyone stays is counting on something this building has not shown.
How many units are offline or down right now, and why is each one out?
Why ask it
Down units are sometimes an honest renovation program and sometimes a leak nobody has fixed since last spring. Find out how long each has been out and what it will cost to bring back, then walk into every one of them.
What other income does the building earn from laundry, parking, storage, pet fees or late fees?
Why ask it
Other income is real but soft. The laundry room may be on a contract with an operator who keeps a share, and late fees only exist while residents are paying late. Twelve months of each line on its own shows which ones you can count on.
Are any residents paying through a housing voucher or assistance program, and what does the program ask of the owner?
Why ask it
A voucher contract tends to bring its own inspections, paperwork and limits on rent increases, along with a dependable share of the rent each month. Programs differ, so read the contract and call the agency that administers it to learn what a change of owner involves.
What are competing buildings nearby charging, and what concessions are they offering right now?
Why ask it
The rent survey in a marketing package lists asking rents. Phone the buildings yourself as a prospective renter and note the free month or waived deposit on offer, since the rent after the special is the one your vacant units will compete with.
Running costs
Which utilities does the owner pay, and which are metered or billed to each tenant?
Why ask it
On a master meter every rate rise is yours until the rents catch up, and splitting the service later is construction that may need a permit and the utility's cooperation. Where bills are charged back to residents, find out how much of the billed amount is actually collected and whether local rules limit the practice.
What did heating fuel cost the owner in the two coldest months of last winter?
Why ask it
Where one boiler heats every apartment, the owner buys the fuel and residents open a window instead of turning anything down. Many places also set a minimum temperature a landlord has to provide, and the local housing office can tell you the rule for this address.
What does water and sewer run each month, and has the usage ever jumped?
Why ask it
Water is often the owner's bill in an apartment building, and it is the bill that hides leaks. A step up in usage with no change in occupancy means a running toilet or a broken line somewhere, so read the consumption on twelve monthly bills as well as the amount charged.
Who manages the building today, and what would a professional manager charge to take it over?
Why ask it
A self-managing owner's statement shows no fee, no payroll and no value for the hours spent answering calls, so it understates what the building costs anyone else to run. Get a proposal from a local manager and read what sits outside the fee, since leasing commissions and oversight of construction are often billed separately.
What did repairs and maintenance come to in each of the last three years, and who does the work?
Why ask it
Three years show whether last year was typical or trimmed for the sale. Match the names on the invoices to licensed trades where the job calls for one, since plumbing or wiring done by a handyman paid in cash is both a missing cost and a doubt about the work itself.
What does it take to run the common areas: hall lighting, cleaning, snow, landscaping and trash?
Why ask it
These bills arrive whether the units are full or empty, and the hall and exterior lights usually run on a house meter in the owner's name. Find out whether snow is priced by the visit or by the season, because a per-visit price leaves a hard winter on your account.
Which service contracts come with the building, and when can each one be cancelled?
Why ask it
Laundry leases, bulk internet agreements, elevator maintenance, trash hauling and pest control can run for years and renew on their own. Read the term and the exit clause of each, and have your attorney say which ones would bind you as the next owner.
What has insurance cost for each of the last three years, and what claims have been filed?
Why ask it
The seller's policy ends with the sale and a new owner is quoted from scratch, so the premium on the statement is history. A run of water claims in the loss record can make cover dear or hard to place, which is reason to put a broker on it in the first week.
What are the property taxes now, and how will this sale affect the assessment?
Why ask it
In many jurisdictions your purchase price becomes the new assessed value, so a long time owner's tax bill is not the one you will pay. Call the assessor with the parcel number and put the reassessed figure in your model, since it lowers net income in every year you hold the building.
How much should I reserve per unit each year for replacements?
Why ask it
A replacement reserve is a line lenders commonly insist on and sellers' statements commonly leave out. Size it from the ages of this building's roof, heating plant and paving instead of a borrowed round number, and keep it apart from the routine repair budget.
The building
What capital work has been completed in the last five years, and what do you know is coming?
Why ask it
Invoices tell you what has been spent and, by omission, what has not. A building where nothing large has been replaced in fifteen years is not a bargain: the big bills have been left for the next owner, and several may come due together.
How old are the roof and the heating plant, and has the sewer line ever been scoped with a camera?
Why ask it
These are the items that cost enough to change your return and that a cosmetic walkthrough will not reveal. Get an age and a paper trail for each, then have the sewer line scoped yourself, because a collapsed pipe under a parking lot gives no warning from the surface.
How much electrical capacity does each unit have, and what kind of wiring and panels are in place?
Why ask it
Older apartment buildings were wired for a few lights and a refrigerator in each unit. Residents who add air conditioners and space heaters trip the breakers, and some older panel and wiring types are hard to insure, so have an electrician name what is installed and pass that description to your insurance broker.
What are the supply and drain pipes made of, and how often are there leaks or backups?
Why ask it
Plumbing in a stacked building fails by the riser, so one bad section affects every floor on that line. The maintenance log shows whether the leak calls are scattered or keep coming from the same stack, which is the difference between a repair and a repiping job.
Are the fire alarm, sprinklers, extinguishers and smoke and carbon monoxide alarms inspected and up to date?
Why ask it
Life-safety equipment usually carries an inspection tag with a date you can read as you walk past. What a building of this size and age must have is a matter of local code, so check with the fire marshal's office what applies and whether a sale sets off an upgrade.
Has the building had bedbugs, roaches, rodents or termites, and how was each case treated?
Why ask it
Pests travel between apartments through shared walls and pipe chases, so treating one unit rarely ends it. A standing monthly contract can mean a careful owner or a problem that never went away, and the dated invoices, unit by unit, say which.
What state are the windows, the siding or masonry and the balconies in, and when was the exterior last worked on?
Why ask it
Exterior work is priced by the area of wall and the number of windows, and an apartment building has plenty of both. Look for fogged glass, cracked lintels over the openings and rust where balconies meet the wall, and bring an engineer for anything structural. Some cities require periodic facade or balcony inspections, so find out whether this one does.
How many units have been renovated, to what standard, and what did each one cost?
Why ask it
A seller who renovated the easy units first leaves you the awkward layouts and the oldest plumbing. The cost of each finished unit and the rent it then achieved give you a real return on renovation for this building to hold your own plan against.
Is the property in a mapped flood zone, and what would flood insurance cost?
Why ask it
Garden and ground-floor apartments take water first, and the boilers and meters tend to be down there with them. A lender may require flood cover depending on the map, so get a broker's price for it before the purchase price is settled.
Rules and records
What is the zoning, and is the current unit count conforming?
Why ask it
A legal nonconforming building can usually keep operating but often cannot be rebuilt at the same density after a major loss, which changes both your insurance requirements and your exit. Get the answer from the zoning office in writing rather than from the offering memorandum.
Does the city require a rental license, registration or periodic inspection, and is this building current?
Why ask it
Where licensing exists it usually attaches to the owner, so a buyer applies afresh, and an inspection on transfer can produce a repair list. The licensing office can tell you from the address what is on file and what a change of ownership sets in motion.
Is the property subject to rent regulation, an affordability covenant, or a tax abatement with conditions attached?
Why ask it
Regulated rents and recorded affordability covenants limit the rent growth your whole model may depend on, and they typically stay with the building when it is sold. An abatement can also expire or require continued compliance, so read the recorded documents rather than accepting a summary.
What rights do residents have here when a building is sold or renovated: notice, relocation payments or a first chance to buy?
Why ask it
Some cities give tenants a right to purchase, require payments to a resident displaced by renovation, or allow a tenancy to end only for listed reasons. Those rules decide whether a plan to renovate and raise rents is possible at all, so put the question to a local landlord and tenant attorney before you offer.
Have residents filed complaints with the housing office or formed a tenants' association?
Why ask it
Complaint files are often open to the public and show what residents were unhappy enough to report: no heat, pests, repairs left undone. A tenants' association is not a defect in the building, but you want to meet it already knowing the history.
Are there any environmental issues: underground tanks, asbestos, or lead paint records?
Why ask it
Older buildings often had oil tanks that were abandoned rather than removed, and the cost of a leak can land on whoever owns the land when it is found. Lenders commonly require an environmental screening for that reason, so order it early instead of a week before closing, and have a local attorney explain how liability works there.
Are there any liens, open permits, code violations or pending lawsuits?
Why ask it
In some towns a permit left open from work finished years ago has to be closed before the next owner can pull one, and unresolved violations can carry penalties that keep growing. Pull the address history at the building department and the court records yourself instead of relying on disclosure.
Does the survey show easements, a shared driveway or anything built over the lot line?
Why ask it
City apartment lots often share a driveway with the neighbour or have a fence or garage sitting across the boundary. A current survey and the exceptions listed in the title commitment bring these out, and your attorney should read both while the contract still lets you object.
Price and closing
Why are you selling, and how long have you owned the property?
Why ask it
A partnership that has to return its investors' money by a set date sells on a timetable, and a timetable is leverage for a buyer. An owner retiring after decades is in no such hurry, though the rents may be old and the books informal. With a seller getting out a few years into a renovation plan, find out what went differently from the projection.
Is the asking price based on the income the building earns now, or on a projection after rent increases?
Why ask it
Apartment buildings are generally valued on net operating income, so the question is whose income. A price built on rents after a renovation you would pay for charges you for the upside twice. Have the broker rework the figure from the trailing twelve months and see how far it falls.
What have similar buildings sold for recently, per unit and against their income?
Why ask it
Price per unit and the ratio of net income to price let you compare buildings of different sizes. Get the addresses behind the broker's numbers and check what you can in public records, because a sale with renovated units and separate meters says little about a building with neither.
Which kind of loan fits a building with this many units, and what will the lender want to see?
Why ask it
Lenders often treat a house of two to four units like a home loan and a larger apartment building as a commercial one, with different down payments, terms and tests of the building's income. The dividing line and the terms vary by country and by lender, so speak to one who writes the right kind before you make an offer.
Is the existing loan assumable, and what would it cost the seller to pay it off early?
Why ask it
An assumable loan at a below market rate can be worth more than a discount on price, while a prepayment penalty or defeasance cost can quietly become the seller's reason for holding firm. Ask for the loan documents, not a description of them.
Does the income still cover the loan payment comfortably once my own expense figures go in?
Why ask it
Lenders measure this as net income against debt payments, and your own margin should be wider than theirs. Run it with the reassessed tax, your insurance quote and a management fee, then again with rents a notch lower, and see whether the building still pays its own mortgage.
How long is the due diligence period, and which documents must the seller hand over on the first day?
Why ask it
The clock normally starts at signing, and each day spent waiting for bank statements or leases is a day of checking lost. Name the documents in the contract with a delivery date, and if the seller will accept it, start the period only once they have arrived.
Will you provide a signed estoppel certificate from every tenant, and access to every unit, before closing?
Why ask it
An estoppel is the resident confirming in writing what they pay, what deposit they gave and what side agreements exist, which tests the rent roll against the people actually paying it. Interior access to all units is where you find the unpermitted work, the pets nobody declared and the leaks that never got reported.
What is prorated or credited at closing: rents, deposits, prepaid rent, taxes and utility bills?
Why ask it
Rent collected for the month is split by the day, deposits and prepaid rent come across as credits, and unpaid rent is whatever the two sides negotiate. Ask for the settlement statement in draft and match each unit's deposit to the estoppel its resident signed.
What will be handed over on closing day: keys, resident files, vendor accounts and a notice telling residents where to pay?
Why ask it
Takeovers go wrong in small ways: no key to the boiler room, rent sent to the old owner's account, a lobby notice with no phone number. Agree a handover list in advance and have your manager on site that day. How residents must be told about a new owner and their deposits can be set by local law, so confirm it with your attorney.
What is my plan for this building, and at what number do I walk away?
Why ask it
Decide before the inspection reports arrive whether you are buying steady income or a renovation project, since each plan tolerates different surprises. Then write down the repair total and the income shortfall at which you renegotiate or leave, while you have no money spent to defend.
Verifying a Multifamily Deal
Practical guidance for the conversation itself
What to Do at a Multifamily House Showing
Start in the basement and finish in the units
The staged apartment is the part of the building the seller prepared for you. Ask to begin with the meters, panels and heating equipment, then the roof hatch or attic if there is one, then the back stairs. By the time you reach the kitchen you already know how many systems you are buying and roughly how old they are.
Count things and write the counts down
Doorbells, mailboxes, electric meters, gas meters, water heaters, parking spaces. Each count should equal the number of units on the listing or have an explanation. The ones that do not match are your first questions for the town and for the seller, and they cost nothing to collect.
Photograph labels, not rooms
Listing photos already show the rooms. What you need afterwards are the data plates on the boilers and water heaters, the inside of each panel door, the meter bank, any inspection tags and every ceiling stain. An inspector, an electrician or an insurance broker can tell you a good deal from those pictures before you spend money on a formal inspection.
Be a courteous guest in occupied units
The people living there did not choose to have their home shown. Keep the visit short, leave cupboards and belongings alone unless invited, and save questions about the landlord for a moment when the agent is not standing beside them. A resident you treated well at the showing is easier to work with after closing.
How to Verify the Income
Tie the rent roll to the bank statements
Take three non-consecutive months, add up the deposits into the operating account, and compare them to what the rent roll says should have been collected. Persistent shortfalls mean concessions, delinquency, or units listed as occupied that are not. This reconciliation takes an afternoon and it is the single most useful thing you can do with the seller's paperwork.
Send estoppels to every resident
An estoppel certificate asks each resident to confirm their rent, their deposit, their lease end date and any promise the landlord made. Residents sometimes report a rent lower than the rent roll, a deposit the seller has no record of, or a verbal agreement about parking or a pet. Every discrepancy is either a price adjustment or a credit at closing.
Shop the competition yourself
Call or visit three comparable buildings as a renter, not as a buyer. Ask what is available now, what the rent is, what the move-in special is, and how long the last unit like it took to lease. Ten minutes of this is worth more than any market summary, and it tells you whether the rent increases built into the asking price are achievable.
How to Rebuild the Expense Side
Build expenses from bills, not from the seller's statement
Collect the actual invoices: tax bills, insurance declarations, twelve months of every utility, trash, landscaping, snow removal, pest control, payroll registers, and the repair ledger. Then add the lines a seller's statement usually omits: management at a market fee, an on-site payroll you will have to pay even if they did not, and a per-unit capital reserve based on actual system ages.
Reassess the taxes at your purchase price
Ask the assessor how a sale is treated in that jurisdiction and what the new assessment is likely to be, then put that number in your model rather than the seller's current bill. In markets with regular reassessment on transfer, this adjustment alone can move net operating income enough to change the price you should offer.
Get your own insurance quote during diligence
Give a broker the address, unit count, year built, roof and wiring type, claims history and construction class, and ask for a real quote. Sellers who bought coverage years ago often carry premiums no new buyer can obtain, and in some markets the difference is large enough to break the deal.
Separate repairs from capital honestly
Owners preparing to sell have an incentive to move recurring repairs into the capital column, which flatters net operating income. Read the general ledger detail rather than the summary, and reclassify anything that recurs annually back into operating expenses before you value the building.
Red Flags in Multifamily Diligence
- Deposits into the operating account that consistently fall short of the rent roll.
- Refusal to allow interior access to every unit, or a list of units that cannot be shown.
- Estoppels that come back reporting rents or deposits different from the rent roll.
- A repair line that drops sharply in the twelve months before listing.
- Down units with no written explanation of why they are down or what they cost to restore.
- An offering that projects rent growth without any recent signed leases at those rents.
- A tax bill based on an assessment far below the asking price in a jurisdiction that reassesses on sale.
- Deferred maintenance concentrated in roofs, sewer laterals or electrical service, which are all expensive and all invisible from the parking lot.
Who You Need on the Deal
- 1A real estate attorney licensed where the building stands to read the purchase agreement, the recorded covenants and any loan documents you might assume.
- 2A commercial inspector plus specialists for the roof, mechanical plant and a camera scope of the sewer laterals.
- 3A local property manager to price payroll, turnover and achievable rents against buildings they already run.
- 4An insurance broker quoting the actual property, early enough that a hard placement does not surprise you at closing.
- 5A lender who will tell you what their appraisal and environmental screening are likely to find before you spend money on either.