How much to offer on a small MF?

2 Replies

Hello! 

I am very interested in a small MF that has a fair amount of deferred maintenance (about $40K). How much should I offer?  I can think of two strategies:

1. Should I use the flip formula? ARV * X% - repairs? Not sure which % would be best to use, since this is a buy and hold.

2. Whatever max purchase price maintains the 2% rule - repairs.  Current gross rent is $2100, which could definitely be pushed to $2400 after repairs.  This leads us to a PP of $105K (based on $2100) - $40K repairs = $65K.

What do you think? Any other suggestions?

I am lucky to get decent properties (built in 60's-70's) in decent neighborhoods (B- ish) for 100x gross monthly rent - repairs.  Your PP target of $65k sounds Detroit-esque, but I don't know the property or neighborhood.  If it's not completely dilapidated or in a war zone, I would forget about the 2% rule.  Maybe go for 1.25% if it's a B in a B,  Up your offer to 1.5% if a C in a C, like that.  @Kimberly Ashkenazi   is this a listed property with an agent, or?  The key will be the seller and their motivation. Hopefully you can speak with them directly. Good luck!

  

@Steve Vaughan You bring up some great points.  Thank you for your advice!  I think we're just going to stick with our original offer.

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