A few years ago an investor came into my office to ask me to manage an apartment complex in Grandview, MO he was buying. He was getting such a good deal that a few vacancies were not going to be a problem. I asked him for some details and we talked about the income potential for the property. The property was marketed as fully occupied and the rents were fantastic. The asking price was great considering the income potential.
Well, except that I knew the property, I knew the area and I knew the market would never support a 100% occupied property in that market at those rental rates. Not the first time I've seen this, investors call me all the time asking for information on specific properties, most of the time the numbers are simply BS.
I told this guy this is not what it appears to be, the numbers do not match my knowledge of the area. I told him that within six months the property would be at 50% occupancy and we would be marketing the property at a much lower rental rate, in fact the realistic rental rate was more than 20% lower than the advertised rent.
So, this guy goes ahead and buys the apartment complex, (he listened to his agent) hires me to manage it. On day one, after talking to the tenants I learn that none of them pay the higher rate, as a matter of fact most pay much less, even less than the rate I figured. The first month goes poorly, only a handful of tenants pay rent, the rest all have excuses or simply avoid me and refuse to pay. I chatted with the local police and they tell me that several of our tenants are drug dealers. The few leases the buyer was given were all bogus, his buyers agent told him that the owner was just really bad at keeping records.
We begin the eviction process and kick out nearly every tenant in the two buildings, the owner goes belly up and gives the property back to the bank. Then; as usual, he blames me and says nasty things. No problem, I'm a property manager, I'm used to that.
Two years later, today I get a call from a guy who is planning to buy the same buildings, the agent has shown him rent rolls from two years ago and is telling him that it's just been poorly managed and that the property can really get those higher rents. The property is currently less than 50% occupied and most are paying the exact amount I quoted the original buyer.
Fortunately this guy seemed to be interested in due diligence, he actually listened to what I was saying and told me that what I said confirmed what he had suspected.
I will not get to manage that apartment complex again, but I won't have to tell yet another investor that they got screwed! God I need to figure out a way to make a living killing deals, this just won't pay the bills!
So if you are looking to buy an apartment complex in the Kansas City area, or this one in Grandview, MO call me first. I won't make any money but I can save you quite a lot.