Please help me think about and analyze this deal.
Member since 2025 · 1 post · 3 votes
Please help me think about and analyze this deal.
Most Popular Reply
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
3mo@Heather Rodden, a few thoughts:
1. Find a decent calculator or spreadsheet to do calculations through. There are MANY ways to look at an investment like this and some will be less obvious to you at the start but unless you see them you may never come to learn what they are about.
2. On the surface it looks like a deal that is worth analyzing more thoroughly mainly because there is room for raising rents.
3. Identify ALL the expenses you will need to pay or budget for both hard expenses and soft ones.
4. Hard expenses are things that are known like mortgage, insurance, taxes, lawncare, etc... They may include some utilities as well!
5. If a utility is provided by a government entity it can generally become a lien if unpaid. For that reason a landlord will usually keep those in their own name to maintain control.
If the utility bill is based on usage, they will probably bill it back to the tenant each month.
If the utility is a flat fixed rate, then they will likely bake it into the rent.
6. Soft expenses are things like capital expenses (roof, hvac, etc etc), maintenance/repair, and vacancy/turnover. A basic starting point might be 5% of income rent for each or 15% total, BUT depending on how you plan to manage and if you plan to do any hands-on work yourself you may wish to budget a higher amount for one or all of these.
7. I would also find out if these units are currently leased or month to month. If you are prevented from raising rents for a year, that impacts what sales price you may wish to pay.
8. You ask about what to offer, but that is VERY hard to say. Get a good realtor to work with! They will have a better sense of that.
Factors on what to offer can include MANY things such as cash or type of financing, doing home inspections or not, etc? The market itself is obviously a factor as is the current owners situation. Does the current owner have any stresses or motivations to make a sale happen. Do they have any financial stresses or maybe they have issues with the tenants themselves even!
MANY MANY things go into what and how to make an offer.
9. As an example to #8...
Once, I went to see a tenant occupied single family. The tenant was supposed to let me into the property but wouldn't answer the door even though they were home. Come to find out the tenant had confirmed many appointments but was denying access and was disgruntled in part because they wanted to buy the property but couldn't.
Instead of walking away, I IMMEDIATELY went home and within 90 minutes submitted TWO simultaneous cash offers!!!
One offer was LOW but the tenant could stay in place for closing and I would do NO INSPECTIONS. Only a walk through was required. The other offer was higher (still below asking) but the tenant needed to be removed before closing and full inspections would be done.
After submitting the offers, I spoke to the listing agent about them. Come to find out the listing agent was from another county and none to motivated to deal with this low value problematic listing. No further showings were being scheduled because of the tenant situation. In addition the owner had NO LEASE, NO SECURITY DEPOSIT, and NO KEYS to the place!
The more we spoke, the more it because clear that they should negotiate on the LOWER offer where the tenant could remain for closing.
I was able to buy that house for over 20% UNDER asking price when it should have sold over ask! I was able to remediate the tenant situation and that tenant remains in place today!
The moral of the story is that 95% of buys saw a "problem", when the problematic tenant situation was actually an OPPORTUNITY! Negotiations are not just about numbers and valuations, many other factors can come into play.
9 Replies
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3mo
@Heather Rodden, a few thoughts:
1. Find a decent calculator or spreadsheet to do calculations through. There are MANY ways to look at an investment like this and some will be less obvious to you at the start but unless you see them you may never come to learn what they are about.
2. On the surface it looks like a deal that is worth analyzing more thoroughly mainly because there is room for raising rents.
3. Identify ALL the expenses you will need to pay or budget for both hard expenses and soft ones.
4. Hard expenses are things that are known like mortgage, insurance, taxes, lawncare, etc... They may include some utilities as well!
5. If a utility is provided by a government entity it can generally become a lien if unpaid. For that reason a landlord will usually keep those in their own name to maintain control.
If the utility bill is based on usage, they will probably bill it back to the tenant each month.
If the utility is a flat fixed rate, then they will likely bake it into the rent.
6. Soft expenses are things like capital expenses (roof, hvac, etc etc), maintenance/repair, and vacancy/turnover. A basic starting point might be 5% of income rent for each or 15% total, BUT depending on how you plan to manage and if you plan to do any hands-on work yourself you may wish to budget a higher amount for one or all of these.
7. I would also find out if these units are currently leased or month to month. If you are prevented from raising rents for a year, that impacts what sales price you may wish to pay.
8. You ask about what to offer, but that is VERY hard to say. Get a good realtor to work with! They will have a better sense of that.
Factors on what to offer can include MANY things such as cash or type of financing, doing home inspections or not, etc? The market itself is obviously a factor as is the current owners situation. Does the current owner have any stresses or motivations to make a sale happen. Do they have any financial stresses or maybe they have issues with the tenants themselves even!
MANY MANY things go into what and how to make an offer.
9. As an example to #8...
Once, I went to see a tenant occupied single family. The tenant was supposed to let me into the property but wouldn't answer the door even though they were home. Come to find out the tenant had confirmed many appointments but was denying access and was disgruntled in part because they wanted to buy the property but couldn't.
Instead of walking away, I IMMEDIATELY went home and within 90 minutes submitted TWO simultaneous cash offers!!!
One offer was LOW but the tenant could stay in place for closing and I would do NO INSPECTIONS. Only a walk through was required. The other offer was higher (still below asking) but the tenant needed to be removed before closing and full inspections would be done.
After submitting the offers, I spoke to the listing agent about them. Come to find out the listing agent was from another county and none to motivated to deal with this low value problematic listing. No further showings were being scheduled because of the tenant situation. In addition the owner had NO LEASE, NO SECURITY DEPOSIT, and NO KEYS to the place!
The more we spoke, the more it because clear that they should negotiate on the LOWER offer where the tenant could remain for closing.
I was able to buy that house for over 20% UNDER asking price when it should have sold over ask! I was able to remediate the tenant situation and that tenant remains in place today!
The moral of the story is that 95% of buys saw a "problem", when the problematic tenant situation was actually an OPPORTUNITY! Negotiations are not just about numbers and valuations, many other factors can come into play.
- Virtual Assistant · Member since 2026 · 54 posts · 20 votes3mo
Quote from @Heather Rodden:
I found a duplex somewhat locally, I’m trying to make it work, but am new to analyzing property. The asking price is $165,000, rent currently is $750/side. 2 bed 2 bath. It also has an empty lot that comes w it. Taxes are $3111. It is rented on both sides w tenants that have been there 3+ years. Fair market value of rent for the area is $974, so there is room for increasing rent. Property is well maintained, 10 yr old roof. I don’t see a lot of maintenance cost other than lawn care. I just want to see what other investors think of this deal, what you would offer, and what kind of return you like to get back. Thanks!
A few quick underwriting thoughts on this one:
On the surface, it’s interesting mainly because of the clear rent upside (from $750 → ~$974/unit). That alone changes the long-term hold profile significantly.
But I’d break it into two scenarios:
1. Current income (stabilized as-is)
- Gross rent: $1,500/month
- Annual gross: $18,000
- Taxes alone are already $3,111 (~17% of gross), which is fairly heavy
- Once you layer insurance, maintenance, vacancy, and management, cash flow is likely thin or negative unless financing is very favorable
2. Market rent scenario (post-lease/turnover)
- Gross rent: ~$1,948/month
- Annual gross: ~$23,376
- Now it starts to look more workable, depending on cap rate in that specific submarket
Key variables I’d want before forming a real offer:
- Lease terms (fixed vs month-to-month and remaining duration)
- Tenant payment history (3+ years is good, but consistency matters more)
- Insurance quote (can vary widely on duplexes in smaller markets)
- Condition of major systems beyond roof (HVAC, plumbing, electrical)
- How “usable” the extra lot is (value-add potential or just land tax liability)
Big picture:
This is not really a “cash flow deal at asking” in most cases — it’s more of a rent-up / reposition play, where the return depends heavily on execution after acquisition.
The empty lot is a wildcard. If it can be legally utilized (ADU, resale split, or future development), it could materially change the upside, but I'd underwrite it separately rather than baking it into base assumptions.
If I were looking at it, I’d probably:
- Underwrite strictly at current rents first
- Then treat rent increase as upside, not baseline
- And let financing + exit strategy determine aggressiveness on offer price
Curious what others are seeing for cap rates in that specific submarket right now.
- Investor · Oakland, CA · Member since 2026 · 25 posts · 15 votes3mo
@Heather Rodden - In terms of target returns or "hurdle rates", most investors like to look at their opportunity cost. This tends to be the risk free rate (what you can get in a money market fund) for Cash on Cash Return, and the long term S&P 500 average when measuring Internal Rate of Return. Currently, these are roughly 4% and 10% respectively.
Essentially you are asking the question, "Could I be doing something more productive with my capital?". Now, REI has several other advantages outside of returns, such as equity growth, depreciation, and rollover tax benefits. But if you can get all that AND beat the alternatives, now that's a sexy argument for putting in the work that REI requires!
Hope that helps frame the thought process. - 3moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Great info from @Kevin Sobilo, except for one part:
"Get a good realtor to work with! They will have a better sense of that." 😤
YOU should be the one to determine what to offer, by backing into the offer price based upon your assumptions for income & expenses!
You want to buy an investment that meets your ROI.
An agent may just want to sell you a property for a commission. Even if they are truly trying to help you meet your ROI goals, YOU should control the offer amount.BiggerPockets has some Calculator Tools that can assist you with potential expenses, you can also Google for one.
Logical Property Management4.9458 Reviews- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3mo
Quote from @Drew Sygit:
Great info from @Kevin Sobilo, except for one part:
"Get a good realtor to work with! They will have a better sense of that." 😤
YOU should be the one to determine what to offer, by backing into the offer price based upon your assumptions for income & expenses!
You want to buy an investment that meets your ROI.
An agent may just want to sell you a property for a commission. Even if they are truly trying to help you meet your ROI goals, YOU should control the offer amount.BiggerPockets has some Calculator Tools that can assist you with potential expenses, you can also Google for one.
If you read the ENTIRETY of my #8, you would see that my suggestion to find a good realtor to work with did NOT suggest they blindly follow a realtors advice about what to offer.
I made clear in #8 and #9 that an agent could provide guidance WELL beyond just price. For example TERMS often play a critical role.
In addition, negotiation strategy can also play a part. Perhaps, there is a time urgency or advantage to be used. These are things a good agent brings to the table IN ADDITION to giving GUIDANCE on what offer might be reasonable/possible.
For example, initially a buyer might want to start LOW and negotiate UP, BUT sometimes there is a time urgency/advantage where its better to make a higher offer up front and present it as FIRM/FINAL with a SHORT turnaround on it. Sometimes the actual offer price is only a small part of negotiating a good deal. - 3moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Kevin Sobilo:
Quote from @Drew Sygit:
Great info from @Kevin Sobilo, except for one part:
"Get a good realtor to work with! They will have a better sense of that." 😤
YOU should be the one to determine what to offer, by backing into the offer price based upon your assumptions for income & expenses!
You want to buy an investment that meets your ROI.
An agent may just want to sell you a property for a commission. Even if they are truly trying to help you meet your ROI goals, YOU should control the offer amount.BiggerPockets has some Calculator Tools that can assist you with potential expenses, you can also Google for one.
If you read the ENTIRETY of my #8, you would see that my suggestion to find a good realtor to work with did NOT suggest they blindly follow a realtors advice about what to offer.
I made clear in #8 and #9 that an agent could provide guidance WELL beyond just price. For example TERMS often play a critical role.
In addition, negotiation strategy can also play a part. Perhaps, there is a time urgency or advantage to be used. These are things a good agent brings to the table IN ADDITION to giving GUIDANCE on what offer might be reasonable/possible.
For example, initially a buyer might want to start LOW and negotiate UP, BUT sometimes there is a time urgency/advantage where its better to make a higher offer up front and present it as FIRM/FINAL with a SHORT turnaround on it. Sometimes the actual offer price is only a small part of negotiating a good deal.Appreciate you clarifying your position:)
Also, can see that I may have struck a professional "nerve":(
Not sure why an investor would care about time urgency/advantage? Maybe on a property targeted as a flip, but highly unlikely on a rental.
Your #9 story supports this. While you rushed home to make the two offers, you also state that the tenant was not allowing showings, so the listing agent wasn't scheduling any additional ones.
- So, what was the "urgency"?Regarding your other example, why would an investor offer MORE than what their ROI calculations dictate? The seller either accepts, has a reasonable counter or the investor should say NEXT and keep looking/offering!
Not trying to demean Realtors in anyway, as I'm one:)
If you'd like to chat about this more intensely, please DM me!
Logical Property Management4.9458 Reviews - Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3mo
Quote from @Drew Sygit:
Quote from @Kevin Sobilo:
Quote from @Drew Sygit:
Great info from @Kevin Sobilo, except for one part:
"Get a good realtor to work with! They will have a better sense of that." 😤
YOU should be the one to determine what to offer, by backing into the offer price based upon your assumptions for income & expenses!
You want to buy an investment that meets your ROI.
An agent may just want to sell you a property for a commission. Even if they are truly trying to help you meet your ROI goals, YOU should control the offer amount.BiggerPockets has some Calculator Tools that can assist you with potential expenses, you can also Google for one.
If you read the ENTIRETY of my #8, you would see that my suggestion to find a good realtor to work with did NOT suggest they blindly follow a realtors advice about what to offer.
I made clear in #8 and #9 that an agent could provide guidance WELL beyond just price. For example TERMS often play a critical role.
In addition, negotiation strategy can also play a part. Perhaps, there is a time urgency or advantage to be used. These are things a good agent brings to the table IN ADDITION to giving GUIDANCE on what offer might be reasonable/possible.
For example, initially a buyer might want to start LOW and negotiate UP, BUT sometimes there is a time urgency/advantage where its better to make a higher offer up front and present it as FIRM/FINAL with a SHORT turnaround on it. Sometimes the actual offer price is only a small part of negotiating a good deal.Appreciate you clarifying your position:)
Also, can see that I may have struck a professional "nerve":(
Not sure why an investor would care about time urgency/advantage? Maybe on a property targeted as a flip, but highly unlikely on a rental.
Your #9 story supports this. While you rushed home to make the two offers, you also state that the tenant was not allowing showings, so the listing agent wasn't scheduling any additional ones.
- So, what was the "urgency"?Regarding your other example, why would an investor offer MORE than what their ROI calculations dictate? The seller either accepts, has a reasonable counter or the investor should say NEXT and keep looking/offering!
Not trying to demean Realtors in anyway, as I'm one:)
If you'd like to chat about this more intensely, please DM me!
1. No professional nerve at all! I spent 30+ years as an IT professional. I don't rely on being an agent for income at all!
2. Did I suggest the example from #9 was one of "time urgency"? There were other stressors in that situation and taking advantage of them had little to do with evaluating a price that makes sense.
3. Time urgency can come into play in MANY ways! Here is a simple example:
After COVID lockouts ended people were making offers on houses like CRAZY. I had a buyer who was living on a friends couch after his engagement ended abruptly. He was desperate to buy a house but every time he made an offer within the first couple days of a listing there were 12-15 other offers made and the house sold well over ask sometimes to a cash offer which he was not.
Come 4th of July weekend, a broker/appraiser who rarely lists put a listing on the MLS, listed a house. We made an offer immediately and with the holiday weekend on our side set a short 24 time frame for a response. Our offer was strong, but we used the slow activity over the holiday weekend and the agent's lack of recent experience to our advantage.
By leveraging time against them, we managed to get that house under contract slightly BELOW ask where it should have sold ABOVE ask had they been more competently represented.
That house could have just as easily been purchased as a rental. At the sales price it would have been a 2% deal and better than that now that rents have gone higher.
4. Did I say to offer MORE than what their ROI calculations dictate? Please stop making assumptions like that. Many times a buyer determines the max they can pay but wishes to start by offering less to start. Sometimes that makes sense, sometimes it may not.
Sometimes it makes sense to make your strongest offer FIRST and set a short response time. Offers aren't in a vacuum, HOW they are presented can also make a difference.
5. Time urgency can come into play in many ways even with rentals. A classic example would be someone doing a 1031 exchange. They have strict time limits. Their time urgency could come into play on either the purchase or sale side as well.
6. I certainly agree that the investor absolutely should maintain ownership of the decision making and do their own analysis, BUT a good realtor can help them not only with that analysis but also with many other factors that come into negotiating a deal.
- 3moG. Brian DavisPro MemberInvestor · Hatboro, PA · Member since 2016 · 2k+ posts · 855 votes
At first glance, I'd be less focused on what I would offer and more focused on whether the deal still works after you account for all the expenses. One thing that jumped out at me is that you've mentioned taxes and lawn care, but I'd also want to budget for vacancy, maintenance, capital expenditures, insurance, and property management (even if you plan to self-manage).
The fact that the tenants have been there 3+ years and the rents appear to be below market is interesting. Just be careful not to assume you'll immediately be able to raise rents to market levels without any turnover or pushback.
I'd run the numbers using the current rents first. If the deal works there, then any future rent increases are a bonus rather than a requirement.
- 3moDenise SuppleeBusiness MemberRealtor · Willow Grove, PA · Member since 2017 · 979 posts · 643 votes
It sounds like there are some things to like about the property, especially the long-term tenants, the newer roof, and the potential to increase rents over time. I'd be careful about making a decision based only on purchase price and rental income. I'd want to factor in insurance, maintenance, vacancy, property management (even if self-managed), and any capital reserves before deciding what return the property is really producing.
One thing I've learned over the years is that the deal is made when you buy. I'd spend the time running the numbers conservatively and see if it still works.
Spark Rental Co-Investing Club577 Reviews
Join the conversationCreate a free account to reply, vote on answers and follow this thread.