First duplex, paying $5,250 more than asking price .. on market

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First duplex, paying $5,250 more than asking price .. on market

Michael Junior
Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
Hey Guys! So as excited as I am about going under contract for my first house hack investment.. I can’t help but think i May have made a mistake. It’s a great duplex in a great location- smack in the middle of Two pronoun college universities, other great schools and in an all around higher income class area. I plan to live in one unit, rent the other as I will be using a FHA at 5% down. Here’s my issue. The property was listed at $350,000- Im payIng $355,250. I spotted it the day it came on market.. turns out so did 10 other guys. I went and viewed the same day it hit the market.. as did the other fellas! Property is nice, physically appealing in the sense that there isn’t any major repairs to be done ( to the naked eye ). Anyways, I asked around.. showed the property to a few contractors I deal with in the area. As well as agents, and lenders. All see it as a great investment. The numbers work, but I can’t help think that I’m doing wrong. Everything I read says to buy right ( like 15-20% below what the market bares ). Is this always the case? Or could I still have struck a fairly good deal even having to over pay a bit. P.s I’m an agent myself.. all the other offers were cash offers. Above asking- I only got the deal because I waived my commissions on it. Just figured I’d throw that out there! But anyways drop me a line.. am I making a mistake?!?!
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y

If it were listed for $1, would you still feel like you over paid because you spent hundreds of thousands over asking? If it was overpriced at $400k and you negotiated down to your current contract price, would you then convince yourself you got a good deal because it was $65k under list?

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  • David Friedman
    Property Manager · San Bernardino, CA · Member since 2014 · 473 posts · 238 votes
    7y

    It really depends on what deals are available in your area and what return your competitors expect in your market.

    If you plan to live in one unit and rent out the other unit, then it is just as much a personal decision as it is an investment.

    Are you choosing to live in one of the units because it gives you a good location to go to work or go to school?

    As far as the investment side of this deal, have you compared it to what other 2 units in the area of the same condition are selling for?

    Maybe this is a good first deal for your level of financing. It is not easy to get into a home with FHA financing when you are competing with cash offers. I suggest you do more research on what other 2 units are selling for. Ideally, you'd get this deal for below market. It really depends on the market though.

    0Reply
  • Ross Kalmbach
    Rental Property Investor · Plano, TX · Member since 2016 · 65 posts · 54 votes
    7y

    I'm sorry if I'm late but are you talking about 1.5% ? 

    0Reply
  • Charles LaRosa
    Flipper/Rehabber · Member since 2018 · 6 posts · 0 votes
    7y
    @Michael Junior Hey Michael, is the property going to cash flow for you? I don’t know much, but if yes, then isn’t it a win? Sounds like a good location too. Good luck!
    0Reply
  • Stephen Kunen
    Rental Property Investor · Bedminster, NJ · Member since 2014 · 217 posts · 60 votes
    7y
    @Michael Junior Thanks for starting this thread Michael. I am struggling with the same dilemma and walked away from an off market deal. Now I am rethinking whether I have done it right - the numbers do work even at the price the seller is asking, and he is even willing to do seller financing.
    0Reply
  • Nick Wallace
    Rental Property Investor · San Antonio, TX · Member since 2018 · 2 posts · 2 votes
    7y
    @Michael Junior Your in shock. Trust your model. Run the numbers again and again and again. Post your analysis and listen to the feedback. Good luck.
    2Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    I don't hung up on what kind of deal the other guy got. I don't get hung up on if I paid asking price, below asking, over asking. I run my own numbers on multi family buy and hold properties. Does it cash flow? No? Don't buy. Does it cash flow, yes? Well, how much? Is there potential for improvements, higher rents, etc? You're getting hung up on paying 1% over asking? Each deal has to hinge on its own merits, not if you're getting it at 80% of asking. 

    1Reply
  • Shawn M.
    Investor · New Haven, CT · Member since 2012 · 285 posts · 175 votes
    7y
    @Michael Junior What town is your home today in? A few years back, 2013, I paid 40k over asking because I was close to Yale and knew the area well. Beat out a bunch of other investors and got it for 152k. Now it’s worth close to 300k. Over the long term your 5k difference won’t matter.
    1Reply
  • Sam B.
    Lender · Indianapolis, IN · Member since 2015 · 270 posts · 217 votes
    7y

    You make your money when you buy and I don't see a lot of money being made on this one.

    0Reply
  • Jason Curtis
    Rental Property Investor · Member since 2018 · 26 posts · 15 votes
    7y

    Price is one thing, cost is another. You made a decision based upon what works for you. Use this deal as momentum. The better deal opportunities most oftentimes are acquired off market through networking, wholesalers, direct mail, and driving for dollars for example. The cost of doing business is a bit higher these days in many markets. 

    There's a lot of competition out there. If one were to analyze for too long, the opportunity may vanish before you can say Cap Rate. I missed out on a deal just last week doing the very same thing. It listed and within 24 hours, was already under contract. I would've gladly paid a bit more than the asking price because the property/location were premo and the numbers worked. I defined my investment criteria ahead of time and then overthought it. I don't advise doing that before or after the deal as long as it meets your criteria. 

    1Reply
  • Michael Junior
    OP
    Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
    7y
    @Anthony Wick it will cash flow once I move out and rent both units, which is exactly what I plan on doing once the terms of my finances allow it. The time I’ll be living there I plan on upgrading minor cosmetics to increase the rent roll.
    1Reply
  • Michael Junior
    OP
    Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
    7y
    @Shawn M. It’s in Fairfield CT smack in the Middle of Fairfield U and Sacred Heart!
    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    The key is to know exactly how much (maximum) you are willing to pay before you make your first offer regardless of the ask price. If, in this case, that number was higher than what you paid then you did not over pay. If you get into a bidding war without having a number in mind in advance then there is no way to judge if you overpaid or not.  

    Good or Bad is 100% dependant on how much you were willing to pay before you begin. It has nothing to do with whether the property will ultimately have cash flow. That is investing without a plan.

    "Good enough" is just a way of convincing yourself that over paying is OK. For some investors mediocre is good enough.

    0Reply
  • Al Pat
    Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
    7y
    @Michael Junior not everyone get a deal at 20% of the asking price. $5000 is absolutely not bad. Don’t let that take the joy of getting property away from you. Focus on next step and path forward, aka finding a solid tenant. You will be fine, I have done the same still think I was good even though it didn’t feel like it at that time. Good luck.
    1Reply
  • Cam Jimmy
    Investor · Anchorage, AK · Member since 2016 · 222 posts · 294 votes
    7y

    A good deal is a good deal... Sometimes the listing realtors will list below market so they can get emotional buyers into a "bidding war". I think you lucked out as long as those numbers really work out. Ive been in 2 bidding wars recently on 2 properties listed below market... But I always stick to my numbers, and I didn't get them because someone else offered higher than me. 

    0Reply
  • Quito Keutla
    Real Estate Agent · Renton, WA · Member since 2017 · 204 posts · 151 votes
    7y

    @Michael Junior Congrats on your first deal!  It's common to have buyers remorse, and second guess yourself especially if it's your fist.  Like what others have said if the numbers work for you and it meets your personal investment goals than its a deal.   Happy Investing!!

    1Reply
  • Quito Keutla
    Real Estate Agent · Renton, WA · Member since 2017 · 204 posts · 151 votes
    7y

    @Michael Junior Congrats on your first deal!  It's common to have buyers remorse, and second guess yourself especially if it's your fist.  Like what others have said if the numbers work for you and it meets your personal investment goals than its a deal.   Happy Investing!!

    0Reply
  • Jonathan Soto
    Lender · Newark, NJ · Member since 2016 · 695 posts · 252 votes
    7y

    Market is competitive and if you are not finding other deals then this will work. If the numbers cash flow are this value then you didn't go wrong. You will either live rent free or pay minimum rent, that is a win. This will help you save for your next investment. You will see if any major repairs needed with the inspection report. Best of luck and don't bet yourself up after you pulled the trigger. Always go by numbers not emotions.

    0Reply
  • Elenis Camargo
    Property Manager · Jacksonville, FL · Member since 2018 · 514 posts · 470 votes
    7y

    @Michael Junior As long as you did your analysis and the numbers work, then it's fine to pay more than list price. You know many times sellers list their properties either at unreasonably high numbers or sometimes they list it too low to just get rid of it. They probably needed to get rid of it fast and that's why so many people went to go view it. Don't overthink it. You did your analysis and should be fine!

    0Reply
  • Shane W. Chapin
    Specialist · Jacksonville, FL · Member since 2016 · 93 posts · 57 votes
    7y

    As a new investor working on my first deal as we speak, I just would like to congratulate you on taking action! Keep the big picture in mind and make sure you stay focused on your goals. Everything else is just noise!

    1Reply
  • Matthew Perry
    Developer · Boston, MA · Member since 2017 · 125 posts · 137 votes
    7y

    Trust your numbers, ignore the noise. 

    1Reply
  • John G.Pro Member
    Rental Property Investor · Brainerd, MN · Member since 2015 · 72 posts · 42 votes
    7y

    @Michael Junior I agree with a lot of these guys.

    Short and sweet, if you ran your numbers and it fits your criteria then overpaying 5k is no big deal in the end.

    I have done it myself, and asked the same questions.  But looking back on that deal, I still own it and have no regrets.  The reason is because I crunched hard numbers and they worked.  In fact, 4yrs later it’s flowing quite well.

    Best of luck to you and congrats

    @Michael Juniorundefined

    0Reply
  • Michael Junior
    OP
    Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
    7y
    @Greg Miller Hey Greg I just want to reach out quick. I got inspections today and found out I may need to replace a gas water heater ( could run me $7k if I need to fully replace). I’m also a bit concerned because I’m doing FHA and need to live in the property. The property is fully leased at the moment. The back tenant wants to stay and sign a year lease. The front unit in which I want/need to live in is occupied by a young couple. No security deposit and paid late a few times on there rent. I’m just worried.. what happens if once I close these people won’t leave? This is my first deal and I’m starting to freak myself out. Am I getting in to deep for a first deal?
    0Reply
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