I am in the midst of a deal currently on a for sale by owner duplex. I am rather new to investing and have more of a construction background than the real estate side. The biggest question and maybe the easiest to most that I have is what is the best way to find the market value prior to submitting an offer for this property? My issue is that I have known the owner my whole life which I feel as though makes it hard to negotiate. I am working with a realtor on other deals so I am not sure if I can ask them what they feel as though it would go on the market for or not. I know this house needs some obvious repairs which the owner either doesn't realize or is in denial of and I plan to have a home inspection done to negotiate off of but am still finding it hard to figure out the baseline. This owner has no idea what the value is and I feel she thinks it is higher than it's worth. Any help on how to proceed would be appreciated.
I would ask the realtor you already have a relationship with to run some comps for you. Comparable sales of similar duplexes within the last 3 and 6 months. This should be pretty easy for them. Comps are the strongest value indicator with small multi's like this. Run the financial ratios also, of course! What is the GRM? NOI? Cap Rate? Make sure the numbers make sense or don't buy. Good luck and keep us posted @Brad Ickes !
Definitely need to run comps. Most realtors will do that. I don't know if you have a service (here its called CRS) that-for a monthly fee- can provide you this and other market info. I would look into it if you haven't already- you need the tools to work!
Also- if it does not cash flow- either walk or look for a reason how it will be in positive soon (maybe you need to renovate a non performing side).
In negations, start on a conservative AS IS value, deduct 6% marketing costs (if you are not using realtors) deferred maintenance, ave. days on market if they need to list it (usually 3-6mo) .
ALWAYS Offer a cash price and a owner carry price. Good Luck
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