Help! Appraisal vs. Contract Price

[Caitlyn J.]

Hi BP community!  I am new around here and my husband and I are in the due diligence phase of hopefully closing our first deal!  It's two duplexes in a popular area of town that's currently being revitalized.  Currently the area is a mix of older buildings built ~1920's that are being restored/updated.  We are purchasing the duplexes for $248k each.  Renovations are just being completed, first unit is rented for $1175/mo.  Rents range from $700-800 for older non-updated units to $1100-1300 for updated hardwood/granite/stainless appliances type places, all within ~1 mile radius.     

Problem - appraisal just came back for $225k per duplex.  Now we either need to negotiate with the seller, walk away, or come up with the difference in cash to close!  Has anyone faced this issue before?  Any advice?  How common is it for investors to pay more for a property than what the appraisal says? 

Thank you all for your help!  Have a great day!

[Nathaniel T. Landrum]

It depends on what you're wanting the property for. I generally won't buy anything for more than 70% of ARV - repair costs, but if it's a long term rental that is already fixed up, I may make an exception. I don't think I would pay MORE than the appraisal though. Try to renegotiate. Just remember never to fall in love with the house...fall in love with the DEAL! If it isn't a good deal, walk away. Good Luck!