Deal Analysis.

[Kurt K.]

Hi everyone. I'm new to BP and new to REI in general. I'm looking to do my first deal and currently have an offer in a 6-unit multi-family house. Seller asking $140k with gross profit of $31k and net with $19k(w/o depreciation). Over the last 17 years he has owned the property all years have been profitable with the average being $11k a year in net profit. From investigating on my own the seller bought the place for $58k. It has a roof that is 6 years old and a new boiler. But the appliances (range/fridge) will likely need to be updated shortly in all units (look from the 70s). Houses in the area are selling for around 60-80k. My feeling is the house is worth in the 105-110 range not 140, although I know there is huge cashflow potential. I would be doing traditional financing on the property which would not be a problem given my current job, affordability wise.

Do I seem way off on my eval at 105-110? or is his 140 offer fair? The seller is in his 80s and owned 6 properties and this is the last of his 6 to sell as he wants out of the business.

Thanks everyone!

[Bill Gulley]

He may be motivated to sell. Justify your offer with him showing comps and depreciation based on age. In fainess, make sure you show him the improvements he has made. When talking about income and the valuation, I usually point out that a buyer doesn't buy tenants, they have to buy the property, the tenants might hate me and love you, so I can't pay for them beyond the lease they have.

With that, it's always eaiser going up when making offers than going down! What's it worth to you? Good luck