I got a lead from my direct mail marketing and I talked to the seller and the property is a 2 family house that is worth about 120k as is and currently is rented out. Each apartment rents for about $700 and he wants 90k but that is before I even looked at the property and actually negotiated with him. I'm sure I can get him down to 80k easily. The question I am asking is what price should I be looking to get since it really doesn't need to have any repairs done and the property is already cash flow positive? If I get it to 80k that is 67% of the appraised value and even better percentage if I was talking about the ARV. Any help is appreciated.
thanks so much to the bp community!!
@Cory Gardner I am assuming this property is in Meriden? Do you have any buyers of multi family property in Meriden that you are working with? If so, ask them what price you would need to sell it to them at in order for them to be interested.
People who are active in the market can best tell you at what price this purchase would make sense.
How is the area it is in?
We need more information in order to be of any real assistance.
Duplexes are valued based on market comps, so the 120k (or 90k) may fair estimates of value. But that doesn't mean that those values make sense as a purchase price for an investor. Someone that plans to rent the property out needs to figure out what purchase price makes sense for them, based on the rental income and expenses.
The 2% rule is commonly thrown around here. Its a general guideline, nothing more, but using that here an investor would want a purchase price of $70,000 or below.
Your post mentions that the property is cash flow positive but it gives no background info. What are the expenses? Taxes? Insurance? Hell, if the current owner paid cash and has no debt cost, just about any property could be cash flow positive.
Lastly, if you plan to wholesale this property, realize you are playing in a smaller buyer pool then a normal SFR. You'll either have to find a) a buyer that plans to live in half and rent out the other half, or b) a buyer that is an investor. Either way, you'll be looking at a value-driven buyer. So a smaller pool, and a less profitable pool, potentially.
the property is in Meriden and not too good of an area but not really bad. Other multi families are selling for 150k and up on the same street. I'm really familiar with the area and one of my friends lived in a rental on the same street and it wasn't that nice at all and still had to play $750 for rent a couple of years ago.
well I was figuring if someone got a 30 year mortgage on the property for 85k the mortgage taxes and insurance would come out to 850-900 roughly a month and if two apartments are already rented out for $700 that would be cashflow positive of about $500 and since I got a discount on the price of the house whenever they decide to sell they could get a profit on that as well.
If only there was some way to figure out how much to wholesale it for and if it would be a good rental. Yes, some way to calculate the answers these questions would be exceedingly handy.... Oh wait, I've got it!
hey Todd thanks for the tip. I'm just figuring if I could get a house 30-40k below what it would sell at on the market to make it even a better investment for the landlord.
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