Appraisal worked to our benefit
While looking for a potential flip candidate we came across a fantastic deal on a 2 unit conversion - built in 1920, 3k sq., that was previously converted to a physician's office 30 years ago. This was subsequently converted to a 2 unit about 4 years ago and the owner who occupied the downstairs unit was moving out-of-state. This property is in fantastic condition - move in ready! listed for $179k the numbers worked - albeit they weren't stellar. after finding the tenant occupied upstairs was almost $300 under market (currently a section 8 tenant) we decided to proceed as upstairs was month-to-month and will be terminated next week. After some negotiation our offer of $163k was accepted. I always use an appraisal addendum - and for good reason.... the appraisal came back at $145k (and no way was I going to pull another $18k out of my pocket to close this). THis appraisal is low - the comps were horrible, the selling agent just didnt fight it or help the seller in any way, and we simply 'waited' till timing was critical for the seller. The net of this was I ended up offering another $5k to bring me up to $150 "take it or leave it" under the threat of the seller walking, which I highly doubted as they needed all proceeds to close on another property they were under agreement on.
Bottom line is $150 was accepted in the 11th hour (pretty close to what time I got a signed extension on the appraisal addendum back as it was expiring the day I made the $150k offer), the downstairs unit is listed and being shown, upstairs is being served notice next week and the property will be "officially" mine Monday!
Purchase $150k / Loan $108k / Rents $28.8k / Tax $4700 / Ins $1200 / Misc $1200
Projecting Net ~ $14k annual
Looking for the next one now!