Leave the deal or stay?

4 Replies

We are under contract to purchase a 4-unit student housing property. The location of the property is A+. We are very disciplined with our investments and we make sure that everything we buy meets the following criteria:

- 1% rule

- 50% rule

- cap rate of > 6%

- Per unit cash flow of at least $250

We put an offer on the building based on financials provide in the offering memorandum. After getting actual financials, cap rate is now <6% and cash flow went from $340/unit to $250/unit.

My questions:

1. would you leave the deal or keep going given the new financial info?

2. Would you lower your offer to get more favorable financial stats?

Thanks in advance!

Establish criteria, and stick to it.  Don't rationalize out of it.  That's nothing more than negotiating against yourself.  Getting the property isn't important...getting the deal is...and they are NOT the same thing.

@Nina Rosete

You say you are really disciplined, so if its a bad deal its a bad deal.  sure, if the seller will budge to make it a good deal "again," sure.  Otherwise, walk away.  Why would you compromise your criteria?