Hey BP! It's been almost a month since I've first joined the community and started to learn about the business. I've been researching multiple multi-family properties, typically triplexes, and one just came on the market that I just visited through an open house. I was wondering if you could help figure out where exactly I should land with an offer.
Asking Price: $410,000
FMV Rent: $1,455 per unit ($4,365 total)
Rent Used for Calculations: $1,164 per unit ($3,492 total) (Used 0.8 FMV to be safe, but I can definitely get the FMV which I will describe in more detail below).
Vacancy Loss: 8.33% ($291.00)
Gross Monthly Operating Income: $3,201.00
Repairs & Maintenance: $320.10 (10% of GMOI)
Real Estate Taxes: $440.00 (1.3% of Purchase Price)
Rental Property Insurance: $170.79 (0.5% of Purchase Price)
Replacement Reserve: $50
Monthly Operating Expenses: $984.85
Annual Net Operating Income: $26,593.80
Capitalization Rate: 6.49%
Cash on Cash Return: 32.53%
Days on Market : 3
Now what's interesting about this property is that it's completely gutted rehabbed (new EVERYTHING, but no stainless steel appliances, but the market doesn't call for it) and it's in a good location. The neighborhood that I'm in is separated by a river. The more condensed and urban area is north of the river and the about-to-be-gentrified area is south of the river (where this property is located). Literally I can drive from the property's location five minutes and be in an area where every many houses are $1 million and over for a single family.
Now I say that I can get FMV for rent because on the other side of the river where it is more urban and condensed (inner city), and they are being charged 80% of FMV. I've been to a couple of open houses on the other side of the river where their asking price is $360-375k, but the quality of the houses are extremely lower and the neighborhood is significantly worse (high crime rate).
I've looked at comps 1 mile radius around the address and the only 3-Unit Properties sold were at $375k and $380k, but they weren't gutted and rehabbed. Perhaps in just good condition. There are many 2-Unit Properties that sold for $330k though. Some things to keep in mind is that that I am going to purchase this through an FHA Loan (requires appraisal???) and that comparable houses that haven't been gutted/rehabbed are also on the market for $400-$425k, but they've been on the market for around a couple weeks to a couple months.
So my question to BP is first off, is it worth it? Secondly, what should I place an offer at? It's only been on the market for 3 days (today was the open house) and I'm afraid if I put a too low of an offer, it will just be ignored.
SO SORRY FOR THE LONG POST!
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