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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