Lender · Ogallala, NE · Member since 2016 · 8 posts · 2 votes
I am looking for my first deal and currently looking at a local 4-plex, all 2 bed 1 bath listed for $175,000. From my realtor contacts and market research I think the market rent is between $550 and $600 for this type and quality of units. Two of the units are vacant, but the other two are leased at $400 with one expiring in 6 months and the other expiring in 11. Without getting into the weeds on expenses and financing, but using conservative figures based off sellers numbers, I am reasonably confident in its ability to marginally cash flow at $550 at a $165,000 price, but it would be a negative cash flow in the first year with the two $400 units. Any ideas on what price to offer or creative solutions in making an offer seem more attractive?
2-4 unit multi's will be valued based on comparable sales, not income.
So the first question is what do other similar 4-plexes sell for in your market? If comparable 4-Plexes with market rents are selling at $225K, say, the seller has already priced in the lower rents. If, on the other hand, comparables are selling at $175K but renting at $550-600/unit, then you need to show that to the seller that they are over-priced.
In general, I always recommend putting in an offer at a level you are comfortable with ($165K?) and using your due diligence to pore through the leases and determine your strategy. After you have removed it from the market, and are able to go through your due diligence without competition, your can re-negotiate based on your findings. In this scenario you may also have some leverage because the seller has to choose between taking your new terms or starting over.