Fooled by a high asking price - Should I continue or let it be

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Fooled by a high asking price - Should I continue or let it be

Rene M.
Charleston, SC · Member since 2019 · 32 posts · 6 votes

Hello together,

I am really new to the real estate game and even though I listened to hours of podcasts, watchedm many videos and webinars and read a lot of books in the last two month... I often have difficulty act to fully rational when I am out in the field making decisions. Especially when it comes to offers.

I am already on my offer number two and both of them got accepted. The first one was a great location in a up and coming but currently high crime are with tenants who trashed the outside and the inside of the place.  I backed out. Even though I really liked the location.

Little bit further away from the interstate exits I found another duplex I really liked. Looked nice, had the viewing. Nice friendly tenants, both places tidy, nice fenced in yard, 2 tax IDs on the property and not having to deal with another owner when making decisions.

New roof, old HVAC and a asking price of 194K for both unit. I (thought) boldly offered 171K. I checked houses in the neighboorhood an saw the last sale in 2016 for 140K - which Charleston, SC has exploded since then. I thought 171K was a fair price. 

It was a multiple offer situation so I increased to 178K and got accepted. Rent is 1650. Raise to 1800 should be possible. Monthly expenses (financing, insurance, Capex 5%, Repairs 5%, Property MGT 10%, Vacancy 8%) 1550...

Now I found another property one street further down. Listed as condo instead of townhouse or SFH (half of the duplex) for 84K... And while it looks like its in slightly worse condition... that was their asking price. So offer likely 80K or even less.

I felt happy to win an offer for 178K for a listing with 194K... but I guess this was not doing thorough enough comp analysis...

I have the inspection scheduled for Wednesday. To make this a fair marked offer I kind of would like to offer 165K with the inspection report (no clue how bad it is... house looks really good besides both ACs) and then hope to end up with 170K again. But this that even realistic? My due diligence is till next Tuesday.

What do yall think... should I:

1. Walk away before inspection and next time do better

2. Try to renegotiate after inspection and walk and walk away over 170K

3. Be happy to get a decent property, with decent tenants and dont worry about 5-6K

Here is my calculation.

As usual any justified input is appreciated!

Thanks in advance

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y

@Rene M. This is generally bad form making a bunch of offers and then backing out of them. Also savvy sellers will see through the inspection negotiation ploy. As a seller I hate it when people do that. Small stuff is fine but asking for like 10k off because you know you overbid is absurd.

Get your comps right next time and make that initial offer or not

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  • Brad Baker
    Flipper/Rehabber · Charleston SC · Member since 2019 · 78 posts · 43 votes
    7y

    @Rene M.

    If you feel confident that you can get 1,800/mo rent and there's no major repairs that need to be made up front I'm thinking you should move forward. Your first deal isn't going to be perfect and this will help give you investment and landlording experience. Could you go find a better deal if you back out? Probably. But you have a DEAL! you have to start somewhere.

    1Reply
  • Danny RandazzoPro Member
    Apartment Syndicator · Charleston, SC · Member since 2016 · 973 posts · 728 votes
    7y

    @John Semanchuk I echo your guidance on not offering too high with the intention of renegotiating. Reputation is important and the local investor community will start to know if renegotiation is typical.

    2Reply
  • Rene M.
    OP
    Charleston, SC · Member since 2019 · 32 posts · 6 votes
    7y

    Thank you @Tanner Marsey, @Brad Baker & @Danny Randazzo

    With this being the first inspection in my life it was very interesting and helpful... But at the same time scary here some of the issues:

    -Wiring/Electric issues: there were double taps and too small cables used

    -Standing water in half of the backyard (every time it rains harder according to the tenants)

    -One of the AC units is from 2003

    -AC air ducts are moldy

    -AC pipe in addict are crushed, insulation broken, taped with lots of air leaving

    -No drip pan and turn off switch for airhandler (2001) in one unit

    -Too little insulation

    -Moisture in the addict

    -Missing firewalls between the two units

    -One unit has copper pluming the other unit has recently received PEX, but where the wall was cut open to replace plumbing has not been closed and you can see lots of mold, mice droppings 

    -One of the water heaters is sitting in water and mold on PVC and is rusting and leaking.

    -Ceiling in one of the units is bend - recommendation to get a contractor estimate

    -One Fridge is leaking, dishwasher not working (possible due to wiring issues)

    -Mold, mildew, flooring, ceiling issues in the bathrooms. 

    -Popcorn ceiling coming of the wall

    -Both fireplaces not functional

    -Structural roof batten rotten need to be replaced.

    -Outdoor wood rott

    -Other AC outdoor unit is from 2007

    Thats what I remember - still waiting for the report.

    On the bright side: Foundation & Brick (some small cracks in brick but nothing to be concerned according to inspector) and Roof seem to have no issues

    Especially for the electric issues I have no clue how much to expect 1K or 10K?

    Also I have been notified by my Bank that due to the current deed I will have to get two separate loans (origination fee, appraisals, title insurance, etc)

    Also this is going to make it more expensive.

    Any thoughts/opinions?

    Thanks

    PS: If i don't use the correct terminology - English is not my native language and I'm trying to improvise as I'm not familiar with all the construction terms :)

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  • Tanner Marsey
    Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
    7y

    looks like you have quite a bit of ammunition to renegotiate. A lot of this stuff isn’t too crazy. It just depends if you can get the numbers to work for you. Electrical is kind of a big deal but other than that.... manageable. Good luck. 

    1Reply
  • John Semanchuk
    Charleston, SC · Member since 2013 · 380 posts · 157 votes
    7y

    I agree with Tanner, sounds like there's plenty to negotiate with and maybe enough to question the deal...  A lot of these items could mean expensive fixes.   Some of them are just getting bids to correct and just means looking at the numbers.   Mold issues, excessive moisture in the attic, standing water... these can be hard issues to fix or even get a handle on how to fix sometimes.  

    1Reply
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