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!
This post has been removed.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.