duplex has no comps

4 Replies

this guy has 4 duplexes that he wants to unload.  he was initially asking 450k for two and 500k for two. but if i bought them all he'd drop them to 400k for two and 450 for two....

1.7m total. 

there are no comps that i can find.  

duplex 1  net income is 2800

duplex 2 net income is 2800

duplex 3 net income is 3200

duplex 4 net income is 3600

expenses

duplex 1 prop tax is 7300 yearly

duplex 2 prop tax is 7500 yearly

duplex 3 prop tax is 7400 yearly

duplex 4 is 7400 yearly. 

he said insurance is roughly 700 each yearly.

 he said tenants pay all expenses and pay extra for their electricity and water and stuff. 

what else am i missing?

so do i do 2800 *12 / 10% cap rate?

bump

Some mentors recommend avoiding 2-4 plexes precisely because they are hard to get comps for.  They can still be great for cash flow, but can be hard to sell.

Run the deal calculator on BP 3 ways.  First with the duplexes' ARVs at the selling (package) price, then 20% less, then 10% more and adjust the financing/downpayment accordingly.  You'll want decent cash flow even in the worst case.  Tweak the expenses too.

Do a letter of intent and make sure you have a due diligence period and then go pay for at least one lender appraisal on whichever property is most "average" of the 4.  If the appraisal does not support the value, do your numbers in the calculator again and then renegotiate the price or walk away.

You need at least PITI, HOA, maintenance, and vacancy. What does he mean they pay "extra" for electricity and water - does that mean the units share meters and you are actually paying the service providers? Make sure you are certain of the expenses you are responsible for if not paid directly by the tenants to the service providers - you will need to have an appropriate allocation approach and lease provisions to manage that.

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