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Buying a 5 Unit Multi Family in Hawaii | Mentorship Monday 095

1,011 views · Published 23 April 2018 · 7:07 · Indexed 21 October 2026

Channel: DeRosa Group · 2018 · Education

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Hey Youtube,

Welcome back to another Mentorship Monday.  Today's question comes from Trey about a 5 Unit multi family property that he's planning to purchase in Honolulu, Hawaii. Nice job Trey, wish I were there!

This is a bit of a funky deal that Trey has going on here, so let's jump into addressing some of his questions. This is a 5 unit multi family rental, or so the owner says, but none of the units are currently rented because, he claims he kicked everyone out so he could do "renovations" to all the units. This is what he says but it just doesn't add up.

So how does Trey validate the rent?
-Ask for old leases from previous tenants.
-Ask for Rent Rolls.
-Financials and trailing 12, which is the last 12 months of rent collected from the date requested.
-Check the books.  If he has good books, then going back and verifying his claims should be no problem. If not, than you have to base your price off of the current market and comparable properties and units.

What about the tax records? The owner says it's a 5 unit but the tax records are showing it as a duplex.
-Call Zoning office and find out what the legal zoning for that property is.  Also try reaching out to the housing authority.
-Be careful with this issue.  If you were to buy the property and begin to rent it out, you could get fines and violations for not being in compliance with the tax office.  They can enforce whatever their records show!
-Another problem you might run into is that the property only has 1 meter. This is another bad sign. Yes, you can create sub meters, but you'll wanna check into this more.

What if I want to back out of the deal?  How can I do that?
-Insert a contingency clause stating that the property would have to be approved and zoned as a 5 unit.  Give yourself a 30 day due dilligence period before you put down a hard deposit.
-Pay certain amount per unit.  This way you put it on the owner to get all the units approved.  The more units they can approve the more money they'll make, but if they can't, then you only pay for what is approved.  They might not go for this one, but it's a creative solution.

Hope this helps! "Have a Great and Profitable Week"!

As always, please email us any real estate questions to [email protected] and we will answer them on an upcoming episode!

Learn more about The DeRosa Group at http://www.DeRosaGroup.com or on BiggerPockets.com - https://www.biggerpockets.com/renewsblog/author/mattfaircloth/
Matt & Liz, founders of DeRosa Group, were recently second-time guests on the BiggerPockets Podcast. 

Check it out:  https://www.biggerpockets.com/renewsblog/bp-podcast-203-finding-deals-funding-contractors-mentors-matt-liz-faircloth/

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