I bought my first multifamily place (Austin). We received financials that showed 92% occupancy and a certain NOI with what would have been a dscr of >1.2

After we closed we see those numbers were highly falsified. The actual rent is 25% of what they showed.

This is a class place that we planned to turn to a Class B (in a Class A neighborhood). However we didn't expect to turn as much all at once.

I have learned a lot from you here. I would appreciate any thoughts on best next steps

I'm not a lawyer but I just sold a business and under the purchase agreement we had to warranty that all reports, taxes and books were presented as factual and in good faith to our knowledge. Our attorney made sure to protect us against something we would have no idea of.

Given my Holiday Inn express experience, it comes down to what is in your contract; and then you have to prove that the seller intended to mislead you. Once that is done you'll need to show how much you were harmed and for how much.

Edit to add my attorney played tennis at A&M and graduated A&M law. He does acquisition contracts. Let me know if you want his contact info.

I would imagine that you need to get a real estate/transaction attorney as soon as possible. They committed fraud. This isn't a minor oversight.

Yes thank you both

Hoping there is a good Aggie attorney on here

Do you have a loan? Does your lender know this?

Sorry to hear about this - unfortunately, there's tons of fraud in multifamily right now. Like you wouldn't believe…

Red Pear Luke said:

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Do you have a loan? Does your lender know this?

Sorry to hear about this - unfortunately, there's tons of fraud in multifamily right now. Like you wouldn't believe…

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I do

They don't

We just found out


Do I need to tell them?

What part of Austin is this? What is your realtor saying about this? I also know a good real estate attorney as well. He's based out of Georgetown.

Red Pear Felipe said:

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What part of Austin is this? What is your realtor saying about this? I also know a good real estate attorney as well. He's based out of Georgetown.

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Hyde park


We were asking questions from the realtor when some things seemed off prior to closing. He kept reassuring us that the numbers were right

I'll take the rec thanks

Do you trust your realtor? Were they just being naive?

Definitely get in front of this with the lender. You'll want/need them on your side.

That's wild, were they completely falsifying the historicals? The last 3 years NOI don't line up with the actuals? Is there a chance there's was a renovation project that cut off rent for a while?

Somebody totally effed up there

You'd be surprised how many multi-million dollar transactions end up with the buyer finding an alarming number of move out notices stuffed in a drawer. Next thing you know, you lost 5-15% of your occupancy in the first month.

You didn't ask for
CPA Certified financials ?
or was that what was given ?

I'm guessing estoppels aren't required in a MF transaction? IMO this is more on the lender than you and agree with what others said…get with your bank immediately- they have deeper pockets than you and fraud has occurred here from what details I've seen. I wish you the best.

Definitely get an attorney before you do anything.

How did no one notice this during the site visit? A property at 92% occupancy would still have a lot of cars in the parking lot. Unless the rents were 25% of market, someone should have seen what was going on.
I'm reminded of what an older appraiser told a trainee about doing inspections: we do it to make sure the property exists.