Needs help with this offer

[Tracey Williams]

Hi Everyone,

I hope everybody is having a great day and fulfilling your dream as a real estate investor. I stayed up last night working on offer price for some properties that are coming my way and I need your contribution on this one.

A 12 units Apartment in a good location. It's a shortsale
Each Unit is 2bedroom with 2.5bath and a finished basement
Year Buit is 1990
Asking price is $500,000
90% occupied
Rent is $750- $800
Tax is $20, 956
Insurance ????? I don't have the number right now
Management Fee= 10% (Assume)

Please tell me what you'll offer and how you arrive at the price or the rule you applied.

Thanks
Tracey

[Joel Owens]

Just remember hard money will make the debt service extremely high and the cost of points.

You can have high occupancy where the loan was funded at the height of the market and the seller paid 80,000 a door etc.

90% occupancy for how long?? Look for the blend rate over a 12 month span. Are rents decreasing,flat,increasing?Is occupancy at 90% after "puffing"??

This makes the property appear to be performing and on the upswing.Then you buy it and then occupancy goes back down to 70% or 60% and find without the credits it won't stay rented at 90%.Now you overpaid.

Also could be 90% but a bunch of deferred maintenance.Landlord could have reduced rent instead of fixing things.Now you have tenants for years there leaving and pouring thousands in per unit to get rent ready again plus loss of rental income.

Puffing is when banks and management companies offer reduced rents to keep tenants with undisclosed agreements,or they give concessions on first months rent,or do not charge for security deposits etc.

I don't know why if this is such a great property the current owner doesn't get a debt service reduction or a interest rate reduction for 1 to 2 years.They could also try to modify the loan.Bankers usually want to do this on performing properties where they give the owners time for the market to improve rather than taking a big hit.

Good luck but it i snot adding up to me.