Excluded Income Properties

Many seller disclosure laws apply only to 1-4 unit owner-occupied properties. If you're buying an investor-owned property or an REO, the law may not require the seller to fill out a disclosure statement. If the seller does refuse, offset your additional risk by scaling down the top price you're willing to pay. Also, toughen up your prepurchase inspections.

Many states exempt investor properties from their seller disclosure statutes.

Additionally, when buying income properties, verify rental income and operating expenses. Ask the sellers to sign a statement whereby they swear that the income and expense figures that they have reported to you stand true. Beware of owners who put friends, relatives, and employees into their buildings at inflated rent levels. These tenants don't really pay the rents stated (or if they do, they get kickbacks in cash or other benefits), but their signed leases sure look attractive to unsuspecting buyers.

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