First four unit in DC, offer in, two units vacant, and everything to set up before closing
The problem: First time multifamily investor in Washington, DC with an offer on a four unit property. He plans to live in one unit and rent out the other three, with two units vacant to fill, and hire a professional property manager. He is asking what to do before closing: leases and deposits, finances and bookkeeping, choosing a manager, building reserves, and avoiding first time landlord mistakes.
The short answer: Two jobs: verify what you are buying, and be ready to fill what is empty. Get every lease, deposit, and a current rent roll, have occupied tenants sign estoppels, read the settlement statement for deposit and rent credits line by line, and interview three property managers before you own the building.
The solve
Lawrence, you have an offer in on a four unit in DC, you will live in one, rent three, and two of those three sit vacant, so your closing work splits into two jobs: verify what you are buying, and be ready to fill what is empty.
Start with the paper that proves the income. Get every lease, every deposit amount, and a current rent roll, and have the tenants in the occupied units sign estoppels, a short form where each tenant confirms their rent, their deposit, and their lease end date in their own hand. If the seller's numbers and the tenants' numbers disagree, you want to learn that before closing, while it is still the seller's problem to explain.
Next, the money that moves at the table. Security deposits and prorated rent for the month you close should show as credits to you on the settlement statement. A deposit that never reaches you is still a deposit you owe that tenant at move out, out of your own pocket. Read that statement before closing day, line by line.
Then your manager. You plan to hire one, so interview three now, before you own the building, and ask each one the same three things: what they charge to fill a vacant unit, how they screen, and for a sample owner statement you can actually read. Have your pick ready to list the two vacant units the week you close, because on a four unit, one empty unit is a quarter of your building sitting quiet.
Keep your reserves in their own account, separate from the building's rent account, and size them for a building where you also live: a furnace that dies is your tenants' emergency and your cold night at the same time. Verify the income, collect every deposit on paper, hire before you close, and list the week you own it. Do those four and your first month runs like a landlord's month, with no scramble in it.
What not to do
Do not wait until after closing to hire the manager or read the settlement statement. The two vacant units and the deposit credits are decided at the table.
Questions
Why do tenant estoppels matter before closing?
Each tenant confirms their rent, deposit, and lease end date in their own hand, so any gap between the seller's numbers and the tenants' numbers surfaces while it is still the seller's problem.
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