What would you offer?
Hi everyone, I have another thread going with more detail (probably too much detail) but I have the pressing question of “What should I offer?” that I wanted to ask outside of that thread.
So here are some copy/paste excerpts from that thread on income and expenses to see if I can come up with a good offer.
Also, here is the link to that thread if you want more information. http://www.biggerpockets.com/forums/88/topics/118247-6-plex---issues-concerns-repairs-etc
Owner owns free and clear, willing do owner financing due in 6 years. asking price $259k, he said he's already received an offer for $245k and that's as low as he'd go. He wants $30k down and 5.75% on the amount he finances. tax assessed value of property is around $210k according to a property program I have access to at work.
Rental income currently at $2700 per month (I would like to renovate and raise to $3200/month)
Taxes are $2990 a year
Electric for outside lights are $70 per month
W/S/G - $405 per month
Insurance - $110 per month
7% ish vacancy - $189 per month
10% maintenance - $270 per month
Estimated Mtg payment $1254 per month
If I were to pay full asking price of $250k,that would put the current cap rate around 7.08%. Even if he dropped it $50k down to $200k, that would still only take the cap rate to 8.86%. I wonder what would be a reasonable offer in this case?
Here are updated figures after upping vacancy and maintenance costs as it stands with asking price of $250k, current expenses, and current income:
Expenses - $(1224)/month
NOI - $17,712/year
Cap rate 7.08%
What I would like to do is buy it for $200k, put $30k in repairs, and raise rents from $450 average to $550 average which would make the numbers as follows.
Expenses - $(1290)/month
NOI - $23,520/year
which would put me at around a 10.23% cap rate...
He also gave his approval for me to take a contractor of my choice in to estimate costs in both time and money to bring the place up to par. But before I even go that far I want to make sure this is worth pursuing.
Thank you,