Should I pull the trigger on this deal.
All,
I came across an opportunity that has the following numbers. I am trying to figure out if I should pull the trigger.
Neighborhood: C+/C
Asking Price: $40,000
Monthly Rent: $800
Last year's taxes was $851
Annual NOI: $5,229 (10% reserve, 8.33% vacancy, 10% management fee, $800 insurance)
So, everything looks good at this point. There is one concern i have. The county's tax assessment is $32,000 for the property. I understand that i am paying for the cash flow so i shouldn't look at the assessment value. Somehow, I am having trouble reconcile the number in my head. Should I give too much weight on the county assessed price?
The reason this came up is because the bank i am working with only lends on the the lower of purchase price or county assessment, like most banks. So i can only borrow 75% of $32k.
This gets me an unlevered return of 13% and a leveraged return of 23%
Should I pull the trigger?