Apparently, the problem of not having the rents buttoned up before listing is not confined to 4plexes in West LA. Just had the same problem on a much larger deal.
Before helping my client offer on the property, I requested the rent roll from the listing broker. We reviewed the information he provided, inputted it into our spreadsheet, and liked what we saw. We made a bit of a lowball offer and then, when it was clear what it would take to get a deal done, came back with a fair offer that more than satisfied the sellers.
That’s when the fun began. First, the listing broker told me that a unit that was listed in the rent roll at one number had actually been rented for $200 / month less. Now, $200 doesn’t sound like a huge amount of money. But regular readers will know that $200 x 12 months x 10 grm = $24,000 worth of value. Ouch.
But it didn’t end there. Two other units also turned out to be way off the rent roll. By the time we finished adding up the difference between the marketed rent roll and the actual one, it equated to roughly $60k would of value.
Why does this matter? After all, the seller eventually disclosed the truth.
But now both brokers have a much harder job. The listing broker is going to have to convince his clients to take a lot lower price for the property than the “fair” offer we made. And I need to explain to my client why I suggested that he overpay for an asset (and also why he should trust anything this seller and listing broker tell him ever again).
Not worth it.
Listing brokers: You’re not fooling anyone. List the real rent roll. Ask a fair price. Or go on wasting everyone’s time.