When reviewing an investment property, investors are usually given a packet prepared by the listing broker. It may include the cash flow, rent roll, contracts, lease expirations, and other important documents. Those are all worth reviewing—but there’s one report I always want to see: the delinquency report.
A rent roll can show that every unit is occupied. That does not mean every resident is paying. A property may appear to be 100% occupied while only 70% of the residents are paying rent. Some residents may be living there without paying, while still using water or other utilities that the owner has to cover.
That gap between occupancy and collections can change the entire picture of a deal. If the delinquency problem is not resolved before closing, the new owner may inherit months of unpaid rent, legal expenses to pursue evictions, and the cost of turning units after residents leave. Those units may need cleaning, repairs, and other work before they are ready to rent again.
That means less income coming in and more money going out—sometimes immediately after purchase. A property can look full on paper while creating a serious cash-flow problem in practice.
Before you buy, look beyond the occupied-unit count. Review the delinquency report and ask how much rent has actually been collected, how long balances have been outstanding, and what steps are being taken to resolve them. Confirm who is responsible for utilities and understand the potential legal and unit-turn costs.
Unless you’re buying a homeless shelter, a property where many residents are not paying is not the opportunity its occupancy percentage may suggest. Know what you’re really buying before you close.