Rural 4plex with no comps

6 Replies

Question: I’ve identified a 4plex property in a small town (10,000) people. There are no comps in the area but I know this town is stable with many varieties of businesses making the economy turn. The rents come in at 3100 total and the landlord pays utilities of $550/month when all units are rented. I have all the leases and have verified rent amounts. There are two much nicer and 2 bd 1 bath duplexs for sale in town on the market for $150k How do I make a reasonable offer on the 4plex? The owner has it listed for sale by owner for $154k

Make them an offer where the price makes sense for you and hits your cash flow number.

Then just make sure you have a financing and appraisal contingency in your offer so the bank can do an appraisal and make sure the property is worth what you're paying!

Hi Darson! I've had this happen to me too but not in rural areas. In this case, I'd work backwards. I'd crunch the numbers and see at what price you'd need to get it for to make your desired ROI (Be sure to factor in taxes/insurance as I didn't see you noted those but I'm sure you considered it). Also, take a look at the leases to see if you're able to bill the utilities back to the tenants which may offset the utility expense in the future. As far as appraisals, the may take the income approach on this method if you're financing it. You'll also want to factor in future rehab or value add projects as you come up with the offer. I hope this helps! Best wishes!!

-Courtney

Yes I offered $129k and met at $134k sale price.  The property appraised at $137k.  Hard to beleive the apprasil company disnt consider the sale price but ya.  I tried to break the property down i to what it really was and how it could compare to what was being sold. 

Meaning this 4 plex could be split into two seperate 4 bed properties then i went and looked at the class c level 4 bed properties were being sold at.  

That is how I based my offer.  It cashlfowed really well at $154k and even better at $134k!

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