Offer on a multifamily that doesn't cashflow currently

[Aaron Howell]

I'm looking at a 8 unit at a $270,000 price.  Income is about $33,000 per year, expenses are about $30,000.  Market rents are $250-300/month under market for the area so basically the owner shows a small loss on their Schedule E with depreciation.

Pushing the rents to market rate would make the deal a great one in the long run but what do you offer on the property now ?  The Cap rate in the area is around an 8 cap so using that I should offer $68,000 so that's not realistic.

[Jeff B.]

Originally posted by @Korie Apgar:

So if have this correct, the gross monthly rents are $1500?  I'd make sure I didn't pay more than $150,000.  Take into account deferred maintenance.  Will never understand why landlords don't keep rents at market value.  It directly affects the property value.  Why hurt yourself?  

When "Income is about $33,000 per year", using a GRM of 10, the FMV is 330,000. This is the baseline from which the appraiser will work.