Paralysis by Analysis

6 Replies

Hello, I am analyzing a deal (actually made offer, they rejected, so re analyzing) on a DUPLEX. 

Well maintained (all mechanicals are no older than 6 years; new roof 3wks ago, new elect boxes,etc)  1 tenant just moved out, cleaned up and ready to lease.  Other tenant has been there 3 years, could stay or go.

At current list and income, will CF 250-275/mo. 

My biggest objection right now is that it has a high end appraisal of 140, list is 131, thinking of offering 125 (already rejected lower offers), and not sure area will support higher appraisal, even if I make improvements (minor needed, nothing urgent).  So I will have 30+ in offer and seems like it will have to sit for awhile.

Thoughts on leaving large portion in offer upfront?

Thanks, have a wonderful day

@Toby Jurging

You're in a very weak position raising an offer without a counteroffer, after it's been rejected.  After that point, you basically negotiating against yourself.

@Jim Goebel ... appreciate feedback.  

Agree, nice to have counter.  Little more detail, she rejected 123, so we have an 8k difference, so I was just playing small ball.  

Assuming, which should never assume, I feel she would countered at 127-128, I went in middle of that with wiggle room if need be.    

My biggest hold up right now is leaving 30K in deal with little opportunity to add value to duplex and have a location that supports it.  I can afford to leave in financially, just mentally struggling.  That is where I am paralyzed, keep chunk in an play appreciation game or keep looking for something that I can upgrade more, refi out and keep building.

Toby, the best way to get over fear/paralysis and the like - is to act.  You can think this to death, scenario it out the ying yang - but the longer you wait, the more likely someone else will come along who sees it as a get and acts.  Then you'll be left with nothing more than a story I hear repeated every day about the one that got away.

And, low-balling an already under-appraisal property?  The seller knows what it's worth. There have been rejected offers.  If you like the property, go get it.  

@Toby Jurging Just because it appraise at $141k does not make it a good deal. You have minimal numbers so anything i say is WAG(wild a** guess). using your numbers cash flow of $250*12=$3000 net. $3000/$30000 invested = 10% return on money. My money market pays me 2% so this is better by a factor of 5. Like @Patricia Steiner says act or don't. You will have a built in equity of $9k, almost enough to pay closing cost if you need to sell right away.

@Toby Jurging , appraisals are somebody's opinion.  Not yours.  Same thing with value.

Make sure you're completely honest with yourself when doing a proforma, Excel is only a tool that splits out what you want.

Run your proforma using numbers you feel comfortable living with.  If its returns are within your preference, act.  If they're outside your preference, ditch.  Work your way to the max offer that still meets your preferred returns, then make an offer below it and only counter up to that max offer.

Simple as that.

lets see a bp calculator computation. You are getting likely less than you figured on cashflow . We are investors we don’t pay retail bro ! Retail is for suckers