A Guide to Buying and Selling Multi Family Homes / Working with Investors 

When you have the Seller:

1. Advise your seller to have a conversation with the Tenants that they will be putting the house up for sale, and what that means for the tenants

   1. Their lease will stay in effect

   2. Buyers,Inspectors and appraisers will need access to the building over the coming months     

   3. Click HERE for a sample letter to tenant from seller

2. Verify with the city/town the property is recognized as a legal multi family based on the number of units advertised ( This should be done by the Seller, not the Agent. This can be found by checking with BOTH the assessor's office and the building department in town to make sure that all advertised units are legally recognized units by BOTH departments.  Just because the public record says it's a 3 family does not mean the town/city departments all recognize it as a legal 3 family.   Springfield is particularly notorious for having buildings that look like three families (ie all 3 units have separate electric, separate gas and two separate means of egress for all units, but the third floor is actually not recognized and therefore cannot be rented out even though it might currently be rented out )

3. Verify if the tenants will remain or if the property will be delivered vacant. 

4. Collect copies of Leases ( if applicable ) 

5. Verify with the seller which appliances will remain and if they are owned by the seller or the tenant.

When you have the Buyer:

1. Are the tenants staying or going? - You should put in writing if your buyer wants the tenants to remain or not.  Be specific about each unit.  Please keep in mind that asking a seller to have the tenants removed in most cases will weaken your offer. Ie “First floor tenants to remain, second floor unit to be free of all tenants prior to close.” Typically if you are going to ask for tenants to be removed prior to close, the landlord will not want to give this notice to the tenants until you are through inspections and have your mortgage commitment.  This will extend your closing an extra 45-60 days in some instances. If you are going to do this check with the lender on viability and rate locks.

2. Who owns the appliances? - Make sure the buyer is clear on which appliances the landlord owns and which the tenant owns which may be removed if the tenant is removed.  Ask for the landlord owned appliances to remain and call them out.  Ie “first floor refrigerator and stove to remain, second floor fridge to remain.”

3. Lease/tenant Review - Make your offer “subject to review and acceptance of current leases, escrow accounts, rent rolls and any other relevant tenant documentation” - do they have leases or are they tenants at will?

4. How do the utilities work? How many heating units are there? Do the tenants pay the utilities or are they included?

5. Verify the number of units that are recognized by the city/town.  This doesn’t necessarily need to go in the offer, but the BUYER (not the agent) should do their due diligence during the inspection period.  The buyer should check with BOTH the assessor's office and the building department in town to make sure that all advertised units are legally recognized units by BOTH departments.  Just because the public record says it's a 3 family does not mean 

6. the town/city departments all recognize it as a legal 3 family.   Springfield is particularly notorious for having buildings that look like three families (ie all 3 units have separate electric, separate gas and two separate means of egress but the third floor is actually not recognized and therefore cannot be rented out even though it might currently be rented out )

7. Estoppel Certificate - Get this from the Seller to show the buyer, and perhaps those who are providing the funding, that the lease is in good standing and that there are no significant disputes. 

Working with Investors

Investors will need to know all the information that a traditional buyer does (  See above ) and a bit extra…. 

Financing - FHA / VA financing will only work if the client is purchasing a home to live in 

(Owner occupied ) If this is their first home they will be able to purchase a multi to live in and after 12 months,  rent the multi family and purchase a SFH to live in with another FHA loan . 

Ask investors if they have a team in place….

1. Assemble your team

   • Do they have a  tax accountant

   •  Hire a real estate attorney to review and draft leases

   • Consider a property management company 

   •  Lead - Make sure to give the lead paint info packet to Investors so they know their liability rules 

   • Form to calculate profits - Use this calculator 

2. Recommend if they are a newer investor that they join a landlord/tenant class or  group to help them understand Fair housing laws and avoid any issues. 

Here is a resource to familiarize yourself with the rental process in MA