Need help on a 2 unit!

11 Replies

Hey guys, I have a lead on a two unit that I am having a hard time finding comps on in the area because the majority of this area is single family residences.  This property was bought for 115k in 2006 it has a current tax assessment of 130k.  It has both units currently renting for a total of $1030/ per month, $1500 annual taxes and $700 in insurance.  The owner is willing to sell to me for 75k and I would like to wholesale it to someone for 80k.  Do you think I might have a hard time selling it without having solid comps?  Any help is appreciated. 

While not ideal without comps, it's most definitely worth a look.  what are the yearly utilities, management fees, etc.?  i'd ask about the cap rate for the area but without comps they might not be accessible or reliable.

do this: total yearly rent - taxes - insurance - utilities - maintenance = NOI. divide NOI by cap rate to get fair market value. if value is higher than $100 or $110, you're in biz.

[email protected] | 360‑927‑0959 | http://www.patbritton.com | WA Agent # 120557

Awesome.  Thanks!

@Ryan Mellon  

Just curious; did you get an actual quote for the insurance or is that an estimate on your part? I think it may be a little high. The reason I ask is because I just got an actual quote on a 3-unit 2 story property in Baltimore listed for $150k and it was only $559/yr. They estimated the rebuild cost of $285k.

Its numbers that the owner provided.  I am meeting him tomorrow and hope to get some documentation of these expenses.

Call a couple of investors in the area maybe some REIA contacts or even a few realtors that sell these kinds of properties. Don't ask them for value, what your interested in knowing is what's the average cap rate in the area. Any of the mentioned people will have cap rates but you'll want to hear the opinion from a few different directions. Then apply that to the formula that @Patrick Britton  gave you in this thread.

Originally posted by @Patrick Britton :

While not ideal without comps, it's most definitely worth a look.  what are the yearly utilities, management fees, etc.?  i'd ask about the cap rate for the area but without comps they might not be accessible or reliable.

do this: total yearly rent - taxes - insurance - utilities - maintenance = NOI. divide NOI by cap rate to get fair market value. if value is higher than $100 or $110, you're in biz.

@Patrick Britton Where in the world would you get a reliable CAP RATE for a duplex? It would be more likely that you could get a GRM to value the property.

Hi, just a question for you guys.  I see Cap Rates used a lot on BP.  What are they and how are they computed.  

Howard

Sims, NC

telephone: 252-292-9676

@Howard Manning  

Capitalization Rate = Yearly Income/Total Value

For example, if Stephane buys a property that will generate $125,000 per year and he pays $900,000 for it, the cap rate is: 125,000/900,000 = 13.89%.

But it gets a little more complicated. What if the property's value rises to $2 million two years later? Now the cap rate is a less favorable 125,000/2 million = 6.25%. This is because Stephane could potentially sell the property for $2 million and use that money for an alternative investment.

From http://www.investopedia.com/terms/c/capitalizationrate.asp

Originally posted by @Howard Manning :

Hi, just a question for you guys.  I see Cap Rates used a lot on BP.  What are they and how are they computed.  

Howard

Sims, NC

telephone: 252-292-9676

They are numbers that little investors think make them look like bigger investors. 

Originally posted by @Account Closed :

@Howard Manning  

Capitalization Rate = Yearly Income/Total Value

For example, if Stephane buys a property that will generate $125,000 per year and he pays $900,000 for it, the cap rate is: 125,000/900,000 = 13.89%.

But it gets a little more complicated. What if the property's value rises to $2 million two years later? Now the cap rate is a less favorable 125,000/2 million = 6.25%. This is because Stephane could potentially sell the property for $2 million and use that money for an alternative investment.

From http://www.investopedia.com/terms/c/capitalizationrate.asp

If the value changed in two years then wouldn't the "yearly Income" change also? Oh wait, isn't it NOI/sales price? You obviously don't know what you're talking about.

Oh, it sounded good to me.  Thanks to both of you.  I probably won't be using it anyway.  Seems like a useless number to me.  but I see where a buy and hold investor would be interested.  

Howard from little Sims, NC

We have a caution light.  Hooooray