What would your asking price be for this property?

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What would your asking price be for this property?

Brenda Reems
Member since 2025 · 33 posts · 8 votes

I am analyzing my first deal. These are the numbers:

4 plex built in 2012. All units are 2bd 1ba and good size. Fairly turnkey (needs some gravel in the parking lot, new flooring in the entry way/hallway, holes in vinyl siding from lawn mower). It is a slab on grade so full windows in lower 2 units. I do not have an inspection report but those were the things I noticed. I was not able to get into the lower 2 units unfortunately.

According to the previous owners numbers: Expenses for 2022 was $13,610, 2023 was $13,869 and 2024 was $9,779

Rooms are renting for $825/mo with $50/mo pet allowance. 1 current tenant has a pet. 1 units lease was just signed in March and the rest are on a month to month.

I would like to convert some of these units to a MTR (huge need in this area). MTRs are running $1,400-2,000/mo. I think this could easily get $1,600 if not more.

Place was bought at the end of 2021 for $245,000. They bought above listing price.

Concerns I have are making this property cash flow as a LTR. Second is the difference in expenses from 2024 to the 2023 and 2022. Was there deferred maintenance? Were they fudging the books? Those numbers do have management fees included. I would manage on my own for now but may not want to do that for forever.

My numbers and the realtors numbers are not adding up. I am new so I wanted someone else's opinion on what an investor would offer with these numbers. It is an off market deal. 

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Benjamin AakerPro Member
Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
1y
The problem that you will run into is that, as an investor, you'll want to use the income method to calculate the value, but 4 plexes and down often sell for whatever the market is doing and right now the market continues to be up. That means your seller will be thinking it is worth a lot more than you do (though this phenomenon is less pronounced as you go higher from SFR to duplex to triplex to quadplex. For the market, you should ask an agent in your area who deals with these types of properties.

For an investment, very roughly, I'd look at the monthly rent for each unit x 4 units x 12 months for the annual income. Ignore pets unless you know there will be pet rent all the time. That's 825 x 4 x 12 = 39,600. Estimate 50% of this to go to expenses (everything but the mortgage and capital expenditure). You might be able to do better than this, but starting out, go conservative. That leaves 19,800 in net operating income. Subtract 5% of the gross income for cap ex (39,600*0.05 = 1,980). Removing that from your NOI leaves 17,820. That's the maximum annual mortgage you can pay. For this property, it turns out to be about $222k if you don't put anything down and have a 30 year amortization at 7% rate. 

You are finding out what many do, as an investor you have to pay less than retail buyers. You'll either need to go bigger or find value-add properties that the typical buyer wouldn't buy. Don't spend any money evaluating this place until you can agree on a price.
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  • Benjamin AakerPro Member
    Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
    1y
    The problem that you will run into is that, as an investor, you'll want to use the income method to calculate the value, but 4 plexes and down often sell for whatever the market is doing and right now the market continues to be up. That means your seller will be thinking it is worth a lot more than you do (though this phenomenon is less pronounced as you go higher from SFR to duplex to triplex to quadplex. For the market, you should ask an agent in your area who deals with these types of properties.

    For an investment, very roughly, I'd look at the monthly rent for each unit x 4 units x 12 months for the annual income. Ignore pets unless you know there will be pet rent all the time. That's 825 x 4 x 12 = 39,600. Estimate 50% of this to go to expenses (everything but the mortgage and capital expenditure). You might be able to do better than this, but starting out, go conservative. That leaves 19,800 in net operating income. Subtract 5% of the gross income for cap ex (39,600*0.05 = 1,980). Removing that from your NOI leaves 17,820. That's the maximum annual mortgage you can pay. For this property, it turns out to be about $222k if you don't put anything down and have a 30 year amortization at 7% rate. 

    You are finding out what many do, as an investor you have to pay less than retail buyers. You'll either need to go bigger or find value-add properties that the typical buyer wouldn't buy. Don't spend any money evaluating this place until you can agree on a price.
    2Reply
    • Brenda Reems
      OP
      Member since 2025 · 33 posts · 8 votes
      1y
      Quote from @Benjamin Aaker:
      The problem that you will run into is that, as an investor, you'll want to use the income method to calculate the value, but 4 plexes and down often sell for whatever the market is doing and right now the market continues to be up. That means your seller will be thinking it is worth a lot more than you do (though this phenomenon is less pronounced as you go higher from SFR to duplex to triplex to quadplex. For the market, you should ask an agent in your area who deals with these types of properties.

      For an investment, very roughly, I'd look at the monthly rent for each unit x 4 units x 12 months for the annual income. Ignore pets unless you know there will be pet rent all the time. That's 825 x 4 x 12 = 39,600. Estimate 50% of this to go to expenses (everything but the mortgage and capital expenditure). You might be able to do better than this, but starting out, go conservative. That leaves 19,800 in net operating income. Subtract 5% of the gross income for cap ex (39,600*0.05 = 1,980). Removing that from your NOI leaves 17,820. That's the maximum annual mortgage you can pay. For this property, it turns out to be about $222k if you don't put anything down and have a 30 year amortization at 7% rate. 

      You are finding out what many do, as an investor you have to pay less than retail buyers. You'll either need to go bigger or find value-add properties that the typical buyer wouldn't buy. Don't spend any money evaluating this place until you can agree on a price.

       I have only been looking at conventional financing at this point. I just called a whole bunch of banks and credit unions. The best I have found is 20% down, 30 year amortization and 6.75% for a 6 year balloon. I could leverage my current home for less down payment with 1 bank but I’m not sure I want to go that route at this time. That just brings my total mortgage payment up. 

      Are you saying you would pass on this property unless you could get it for $222,000 or just something to think about?

      0Reply
    • Jaycee GreenePro Member
      Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 726 votes
      1y
      Quote from @Brenda Reems:
      Quote from @Benjamin Aaker:
      The problem that you will run into is that, as an investor, you'll want to use the income method to calculate the value, but 4 plexes and down often sell for whatever the market is doing and right now the market continues to be up. That means your seller will be thinking it is worth a lot more than you do (though this phenomenon is less pronounced as you go higher from SFR to duplex to triplex to quadplex. For the market, you should ask an agent in your area who deals with these types of properties.

      For an investment, very roughly, I'd look at the monthly rent for each unit x 4 units x 12 months for the annual income. Ignore pets unless you know there will be pet rent all the time. That's 825 x 4 x 12 = 39,600. Estimate 50% of this to go to expenses (everything but the mortgage and capital expenditure). You might be able to do better than this, but starting out, go conservative. That leaves 19,800 in net operating income. Subtract 5% of the gross income for cap ex (39,600*0.05 = 1,980). Removing that from your NOI leaves 17,820. That's the maximum annual mortgage you can pay. For this property, it turns out to be about $222k if you don't put anything down and have a 30 year amortization at 7% rate. 

      You are finding out what many do, as an investor you have to pay less than retail buyers. You'll either need to go bigger or find value-add properties that the typical buyer wouldn't buy. Don't spend any money evaluating this place until you can agree on a price.

       I have only been looking at conventional financing at this point. I just called a whole bunch of banks and credit unions. The best I have found is 20% down, 30 year amortization and 6.75% for a 6 year balloon. I could leverage my current home for less down payment with 1 bank but I’m not sure I want to go that route at this time. That just brings my total mortgage payment up. 

      Are you saying you would pass on this property unless you could get it for $222,000 or just something to think about?

      @Brenda Reems Is the property located in Bismarck? 

      [email protected]
      0Reply
    • Brenda Reems
      OP
      Member since 2025 · 33 posts · 8 votes
      1y
      Quote from @Jaycee Greene:
      Quote from @Brenda Reems:
      Quote from @Benjamin Aaker:
      The problem that you will run into is that, as an investor, you'll want to use the income method to calculate the value, but 4 plexes and down often sell for whatever the market is doing and right now the market continues to be up. That means your seller will be thinking it is worth a lot more than you do (though this phenomenon is less pronounced as you go higher from SFR to duplex to triplex to quadplex. For the market, you should ask an agent in your area who deals with these types of properties.

      For an investment, very roughly, I'd look at the monthly rent for each unit x 4 units x 12 months for the annual income. Ignore pets unless you know there will be pet rent all the time. That's 825 x 4 x 12 = 39,600. Estimate 50% of this to go to expenses (everything but the mortgage and capital expenditure). You might be able to do better than this, but starting out, go conservative. That leaves 19,800 in net operating income. Subtract 5% of the gross income for cap ex (39,600*0.05 = 1,980). Removing that from your NOI leaves 17,820. That's the maximum annual mortgage you can pay. For this property, it turns out to be about $222k if you don't put anything down and have a 30 year amortization at 7% rate. 

      You are finding out what many do, as an investor you have to pay less than retail buyers. You'll either need to go bigger or find value-add properties that the typical buyer wouldn't buy. Don't spend any money evaluating this place until you can agree on a price.

       I have only been looking at conventional financing at this point. I just called a whole bunch of banks and credit unions. The best I have found is 20% down, 30 year amortization and 6.75% for a 6 year balloon. I could leverage my current home for less down payment with 1 bank but I’m not sure I want to go that route at this time. That just brings my total mortgage payment up. 

      Are you saying you would pass on this property unless you could get it for $222,000 or just something to think about?

      @Brenda Reems Is the property located in Bismarck? 


      0Reply
    • Benjamin AakerPro Member
      Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
      1y
      Quote from @Brenda Reems:
      Quote from @Benjamin Aaker:
      The problem that you will run into is that, as an investor, you'll want to use the income method to calculate the value, but 4 plexes and down often sell for whatever the market is doing and right now the market continues to be up. That means your seller will be thinking it is worth a lot more than you do (though this phenomenon is less pronounced as you go higher from SFR to duplex to triplex to quadplex. For the market, you should ask an agent in your area who deals with these types of properties.

      For an investment, very roughly, I'd look at the monthly rent for each unit x 4 units x 12 months for the annual income. Ignore pets unless you know there will be pet rent all the time. That's 825 x 4 x 12 = 39,600. Estimate 50% of this to go to expenses (everything but the mortgage and capital expenditure). You might be able to do better than this, but starting out, go conservative. That leaves 19,800 in net operating income. Subtract 5% of the gross income for cap ex (39,600*0.05 = 1,980). Removing that from your NOI leaves 17,820. That's the maximum annual mortgage you can pay. For this property, it turns out to be about $222k if you don't put anything down and have a 30 year amortization at 7% rate. 

      You are finding out what many do, as an investor you have to pay less than retail buyers. You'll either need to go bigger or find value-add properties that the typical buyer wouldn't buy. Don't spend any money evaluating this place until you can agree on a price.

       I have only been looking at conventional financing at this point. I just called a whole bunch of banks and credit unions. The best I have found is 20% down, 30 year amortization and 6.75% for a 6 year balloon. I could leverage my current home for less down payment with 1 bank but I’m not sure I want to go that route at this time. That just brings my total mortgage payment up. 

      Are you saying you would pass on this property unless you could get it for $222,000 or just something to think about?

      With this initial look, I'm just ruling out properties, never ruling them in. The asking price is too high by my analysis. But if it were at $222k, I'd move on to more underwriting and not cross it off yet. 
      0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    1y

    You need to put your location in your profile and your post. That way local experts can weigh in. You might be in a market where rents should be double that. Or in a market where rents should be 10% less but the landlord picked low quality tenants that couldn’t rent anywhere else 

    You should also check out the property history and see if there’s been any appreciation. In many markets 4plexes barely appreciated for decades. Then house hacking caught on and they ballooned. But that can only happen once. 

    1Reply
  • Brenda Reems
    OP
    Member since 2025 · 33 posts · 8 votes
    1y

    Sorry. Newer to the forum. The property is not in Bismarck but is in Minot ND. I think the current rates are accurate. Again, I am new but from my research, they seem like they are good. There are no garages which is a fairly big deal in ND. There is availability to add 5 later. Class B neighborhood. But, it is fairly close to the railroad. 

    0Reply
    • Jaycee GreenePro Member
      Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 726 votes
      1y
      Quote from @Brenda Reems:

      Sorry. Newer to the forum. The property is not in Bismarck but is in Minot ND. I think the current rates are accurate. Again, I am new but from my research, they seem like they are good. There are no garages which is a fairly big deal in ND. There is availability to add 5 later. Class B neighborhood. But, it is fairly close to the railroad. 

      @Brenda Reems I would agree with just about everything @Benjamin Aaker wrote and add that, depending on other characteristics about the property (proximity to the railroad, no garages), you may need to discount (or add to) the amount you're willing to pay for it. The fact they paid above listing is irrelevant to you now. 

      Also, have you been able to see the detailed operating expenses from the last 3 years or did they just give you the total number? If they won't give it to you, don't waste any more time on this one! Good luck!

      [email protected]
      0Reply
  • Brenda Reems
    OP
    Member since 2025 · 33 posts · 8 votes
    1y

    @Jaycee Greene I did see their breakdown for the last 3 years

    0Reply
  • Brenda Reems
    OP
    Member since 2025 · 33 posts · 8 votes
    1y

    @Jaycee Greene I work at the hospital there. Speaking to all the travelers, their biggest concern is housing. I have spoke to numerous of them in regards to this. W we have even lost some travelers due to this. There are only 23 MTRs on furnished finders and only 3 available. These are either 6 month minimum or over $2,000 larger homes. Same with Airbnb. Although from what I gather, everyone uses FF

    1Reply
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