3-unit mfh severely underappraised

[Cole Puterbaugh]

Under contract for a 3-unit mfr in Cleveland. My first purchase. 

Purchase price is 177K.

Appraisal is 138K.

I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.

Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...

[Dan H.]

Quote from @Cole Puterbaugh:

Under contract for a 3-unit mfr in Cleveland. My first purchase. 

Purchase price is 177K.

Appraisal is 138K.

I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.

Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...

 Normally I would say dispute the appraisal but if comps support the apppraisal then the appraisal s accurate.  

I do not understand why you would want to pay over retail.  The $39k negative initial position would consume years of cash flow.  From an accounting perspective, the initial cash flow does not occur until the negative position is recovered.  

I highly suspect my underwriting would not show $700/month cash flow with 80% LTV loan at current rates. However, using your cash flow numbers it 55.7 months to recover the negative position. So over 4.5 years. To place this in a different light, I have never not recovered my investment in more than 5 years (mostly I have done it in less than 2.5 years).

This is an absurd purchase.  I question if any successful RE investor will disagree with my statement.  Do yourself a favor and walk if the seller is unwilling to drop to virtually appraised value.  

Also, I do not believe anyone who has cash to purchase would even pay $138k (they would have to be very inexperienced).  Anyone who finances will encounter the same issue with the seller requesting far over value for his property. 

Are you going to BPcon?   If this closes at over $170k in next 90 days, I will treat you to burgers, fries, and soda at BPCon and we can discuss my wrong forecast over lunch at my treat.  

Good luck