BiggerPockets

Does it make sense to buy an overpriced multifamily residential rental if the rental income can
cover the mortgage payments (inclusive of PITI)?

please be as critical as possible. :D

well, if we go by the 3x property-value-to-income ratio, that is a sustainable property value. If the house is priced at 9.75x ratio, then it is overvalued. I am interested what other risk factors such an investor would be exposed to if s/he only looked at the PITI ratio to calculate the rental income. For example, if the PITI is 3,000 and the rental income is 3,500 determined by the local market, what other risk factors come into play?

Nope? The bank won't lend money on a deal like that either.

Danny, there is something called NOI or net operating income and there are a million different factors that influence, some of which are direct and others indirect.

You're going to have to figure that number out first.

Once you have that then you can figure out your annual debt service (ADS) because the bank will give you the debt service coverage ratio (DSCR). You can figure out the investment value based on a market cap rate. Tons!

Plus why would you purchase a property to break even?

If there was extra land I could parcel out or demo the building and construct a higher density or sell the land to a developer for a fat profit then the building breaking even wouldn't bother me as much.

Because the value wouldn't be tied to just the building bit more so the land that it sits on.Also if the rents were under market and you had deferred maintenance that would come in as far as value plays.

I don't just look at a property from an income stand point.There are many angles to look at it from where it might make sense.