How bad is overpaying for long term duplex investment?

Question

I put an offer in on a duplex yesterday in the Jacksonville FL area. It is a 3bed 3 bath in one unit (which is what caught my attention!) and the other is a 2 bed 2 bath. They are asking $185k ”as is” and I went in at $190k for the sake of making a strong offer and to secure a contract. The area seems quiet and there’s an elementary school right across the street. Seems like mostly of an industrial area.

They claim to have renovated it and it does look renovated for the most part. Roof looks brand new, floors, bathroom vanities HVAC units, water heaters etc. I would say there’s still some work that can be done to it as far as fresh paint and cleaning up but it looks like the bigger expenses have been taken care of.

It also has a big attached shed-like structure in the back for each side. I’m thinking we can charge extra for storage.

My strategy as far as negotiations goes is if they accept my offer at $190k I will get my inspection done, and will request for them to fix whatever comes out it and if they refuse to then I will ask to bring the price down or I will just back out. I figure this could be a good strategy to get them to come down since if they don’t then they will have to move on the next buyer (wastes time) in which then they will have to disclose what I found in my inspection and it’ll probably be best if they take my revised offer. Not to mention they already asked if we can close sooner than 30days and if we can cut the inspection time to 7 days rather than 10. Maybe a sign of desperation?

Anyway, my question is if I pay that $190k I calculated conservatively that I will make about $325 after all expenses with the minimum potential rents and maximum potential mortgage payment. It’ll probably be a little more than that since I went conservative. Not too bad. What I fear is overpaying and the market crashing. Do you guys think that if the seller is not willing to lower or budge that I should still go through with it? I feel like it’s a good deal but I’m just fearing the price that I’m paying. I also noticed that they paid $28k in February for it. Then again consider those big expenses, roof, HVACs, water heaters, etc. Let me know what you guys think. Thanks in advance.

Jonathan Greene · Answer

If you say "Just cause they said as is doesn’t mean I can’t request they fix something. And it doesn’t mean they won’t change their mind" that isn't going to be of long-term help to you. Your attitude is all wrong on the purchase, it's too much focused only on you. If it's competitive, 190 on 185 is not a lot at all, and also you want to be confirming that you are taking it as-is if you want to win. The worst investors are the ones who say they are accepting it as-is and then make requests because you are wasting the seller's time. It seems to me like you are pretty new on offering and are expecting things that don't happen in this market. All multi-family properties near me get 20-30 offers and sell for 50-150k over asking so I feel like you are going to get beaten out on this deal in Jax for a duplex.

Basit Siddiqi · Answer

@Jonathan Perez”as is” normally means that the seller is unwilling to do any updates to the house.Your strategy sucks and gives real estate investors a bad name.You mention that the house is in pretty good condition - New Roof, Floors, Bathrooms, etc.Yet you want to go in with a 'strategy' of getting a discount in exchange for the seller of 'not wasting time'

Jonathan Greene · Answer

@Jonathan Perez if you are new to this, you should not be looking at any as-is deals. Most new investors do because the price seems better, but it's not. It needs work that you don't know about or understand and will likely miss. New investors should be bidding on MLS properties, with an investor-friendly buyer's agent, and doing full inspections. When new investors don't, it's because they don't think they can win without giving things up, but that's how you lose all of your money as a first-time investor.

Jonathan Perez · Answer

@Jonathan Greene thanks for your response. You’re right about that. So what would you suggest I consider if we proceed with this deal and future deals? Always analyze and keep expectations from an “as is” perspective? these may be dumb questions but I really am new to this and the market being the way it is I want to learn to how to navigate through it. All else is good. I’m in a position to buy, I’m qualified, got my down payment, got reserves etc. this would be my second house hack deal.

Jonathan Perez · Answer

@Basit Siddiqi yeah you’re right. That came out wrong. I don’t want to waste their or anybody’s time. Of course, I want a discount, who doesn’t? But I’m not going in expecting it.I went in knowing that 190k is the absolute max I’ll pay. Now, my thing about the ceiling potentially having water damage and mold is what concerns me the most, that’s why I’m saying that after inspection it could be something I can use to get them to bring the price down. Just cause they said as is doesn’t mean I can’t request they fix something. And it doesn’t mean they won’t change their mind. My question is that if they DON’T, should that stop me from proceeding considering all the other improvements and that cash flow I calculated?

How bad is overpaying for long term duplex investment?

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