Negotiating a close deal. When to take it?

1 Reply

Need a little advice.  Here's the deal in a nutshell:

Multi family unit 4-plex, asking price is $130k.  Rent gross is $1475 currently. Property is in good shape needing only very minor repairs.  Current owner owns the empty lot next door as well, but was only selling the 4plex currently.

We bantered back and forth until we reached an impasse at, either $120k for the 4-plex or $125k for the 4-plex and the empty lot.  (I asked him to throw that lot in once we got stuck at $115k...me....and $120k... him).  So he came back with the $120k without, or $125 with.)

MY QUESTION: How close do I let this deal be before I take it? My Threshold was originally $120k without the lot. This places me at $120.71/door, and 17.77% ROI, with $5000 repair cost.

At $125k, I'm at $112.80/door, 16.04% ROI, same $5000 repair cost.

Am I crazy for pressing for the $120k with lot included?  Or should I take this deal because we're so close anyway?  

*Lot is in town, 1 block from city center, town of about 20k.  I guess the lot is worth 7-10k.

Originally posted by @Jerod Smith :

Need a little advice.  Here's the deal in a nutshell:

Multi family unit 4-plex, asking price is $130k.  Rent gross is $1475 currently. Property is in good shape needing only very minor repairs.  Current owner owns the empty lot next door as well, but was only selling the 4plex currently.

We bantered back and forth until we reached an impasse at, either $120k for the 4-plex or $125k for the 4-plex and the empty lot.  (I asked him to throw that lot in once we got stuck at $115k...me....and $120k... him).  So he came back with the $120k without, or $125 with.)

MY QUESTION: How close do I let this deal be before I take it? My Threshold was originally $120k without the lot. This places me at $120.71/door, and 17.77% ROI, with $5000 repair cost.

At $125k, I'm at $112.80/door, 16.04% ROI, same $5000 repair cost.

Am I crazy for pressing for the $120k with lot included?  Or should I take this deal because we're so close anyway?  

*Lot is in town, 1 block from city center, town of about 20k.  I guess the lot is worth 7-10k.

Whether you purchase or not depends on your pre-defined strategy. Also, the criteria may change from market to market. In seattle, our criteria is buying properties that fit the flip rules at 70% of ARV minis construction cost AND after rehab fit at least the 1% rule ($100,000 acquisition plus rehab, closing and hold costs has to have rent of at least $1000/mo).

If you know your criteria, then you know if you will pass or go when a deal is being negotiated. I also trust my gut instinct as well. If I have a bad feel about a place or area, I will pass. 

Finally, I like to buy in either hot areas or the areas with the bottom lowest prices in the area. Everyone has their own criteria.