All Forum Posts by: Account Closed

As a seller I would NEVER allow a buyer in before closing.  As a buyer I could be flexible on allowing the seller to stay over with rent and large deposit held in escrow.

Why not see if your buyers can be flexible?

How does that work on paper?

I always do because I don't waste my day.  What benefit do you get from wasting yours?

For what purpose?  It is a waste of time.

Where would you get the information to calculate a cap rate on a 4-plex?  And why would you want to? 

 Here's a post from another thread addressing valuation of under performing properties.  Imagine a similar property operating to market.

https://www.biggerpockets.com/forums/432/topics/34...

Let's look at it from the market's perspective. Our two identical buildings and a third owned by Bob next door that is a fifth the size of the first two that produces $20,000 NOI at market. At 8% cap rate that property is valued at $250,000. But there is no upside. Should it and the property capable of generating $100,000 NOI sell for the same amount? Of course not. The market is going to see Frank's place as a $750,000 asset. But it has issues. And Frank is lazy not stupid.

So Neil wants to pay only $250,000 for this. But Ben comes in and underwrites this at $500,000 because he knows the $150,000 to get it to market only consists of $70,000 hard costs and the $80,000 is his reward for taking the risk and for his time. He wants the extra $50,000 because he's a nice guy and he is worth it. Now Brian is in the market also and he has a crew sitting around waiting for the next project and his leasing team is telling him they are getting calls everyday for space in a good property. Brian looks at the property and knows he can fix the property for $50,000 because he Is his own contractor and He knows he can lease up within a month of repairs so he has $20,000 less rent loss than Ben would have. So Frank has Ben's $500,000 offer, Neil's $250,000 offer and Brian's $600,000 offer. Now Brian will only spend $110,000 So he is getting a $750,000 property for $710,000. Who will Frank sell to?

Another way to look at this is if Bob builds another identical property next door. As it is completed Mrs. Bob files for divorce and court orders her half. What is the value of the empty building? Bob goes before Judge Neil and tells him he will give up half of the $750,000 building and keep the worthless new building. What's your verdict?

???? The calculation starts out with potential gross income. What if the property was vacant new construction? See how you need to use a correctly calculated NOI.

Why would you care? Duplexes don't have cap rates. For a commercial property only one year of operating expenses are subtracted. If a guesstimated capex were included it would distort the NOI.

I've never had a problem asking an agent how they arrived at their value.  Of course it may very well be a value that they told the owner was too high but they took it to get the listing.  They will want to present the comps in the best way.   The MORE you know about the market the more forthcoming they will be about their knowledge. 

There is no reliable source for cap rates for small residential properties.   Because they are not encumbered by long term above or below market leases you can use better valuation methods like direct sales comparison.  You'll see fake investors telling you cap rates but when asked to see their calculations they can't or it will be with some operating expenses excluded and some non operating expenses included so the calculation results in a CRAP rate. 

If you want a double check using an income approach use Gross Rent Multipliers, GRM. As long as you use comparable properties your expenses should be similar as well as rents. If the market is paying 12 times gross rents then 12 times your gross rents should get you close to market value.