Multi-family shopping is different from regular house shopping in a couple of ways. As noted in an earlier post, you want to make sure that you've got a handle on the revenue figures. The first way to do that is rents.
But what if the previous owner (or legacy owner), has retro-fitted the property for an ADDITIONAL unit, in order to increase the rent collected? There's a few problems with this. One, you can't really tell if permits were pulled just by looking at it. Two, the rent collected is a huge factor. Three, if there are units that aren't "legalized" by the town, it could be harder to get a mortgage (unless you commit mortgage fraud) and four, insurance (unless you are not honest with your insurer, in which case they may deny your claim)
Three and Four are obviously big problems. So, how can you tell? Well, look around for starters for signs that their could be a problem. Some of the top things I look for:
- Lack of Egress. If each unit doesn't have two ways in and out, you could have an illegal unit.
- Finished attic space. Many of these spaces have not been approved.
- Finished units in the basement. Ditto for these spaces.
The listing sheet? While I'd like to say that every agent has gotten to the bottom of this on each property, many just take the sellers word for it, and there are cases where even the seller is unaware that they have an illegal unit. How about the assessor's public record? Again, in most towns, that is MORE reliable, but it is NOT the authority.
The Building Department is the Final Authority
No, you must visit the Building Department in most towns in Massachusetts to satisfy yourself that the building has all the units is is supposed to, and the town has signed off on them. This check should be considered mandatory before signing any P & S on any multi-family property.
