I may be setting the market price-Help - Posted by Brian,WI

Real Estate Investing
1

Posted by Brian,WI on September 30, 2003 at 15:38:43:

Ken,

Thanks for the reply.

The reason I’m only using $1440 per year for maintenance for a 3 family is because it’s just been rehabbed. Don’t know if that’s good thinking or not, but…

You are right there still should be something put aside for the new roof or furnace, etc. I’ll take a better look at that.

Thanks again.

Brian,WI

2

I may be setting the market price-Help - Posted by Brian,WI

Posted by Brian,WI on September 29, 2003 at 13:59:32:

There are a couple of 3-familys I’m looking at that have been completely rehabbed. These are in a “turn-around” neighborhood where a lot of rehabbing is being done on singles, duplexes, 3’s and 4’s. Prior too this “turn-around” it wasn’t the best neighborhood, but not a war zone either.

Anyway, from what I have so far, the numbers on the 3 family look pretty good with an asking price of $159,000.

Gross $23400
Vac. (8%) $ 1872
Taxes $ 1438
Ins. $ 800
Maint. $ 1440
Misc. $ 1200

NOI $16650

Using my “worse case” which is 20% down on asking price I come up with: $159,000-$31,800(20%)=$127,200 financed. This at 6.5% for 30 years gives me a monthly PI of $803.99 or $9647.89 per year for debt service. Now subtract that from the NOI of $16650-$9648=$7002 positive cash flow per year or a 22% return on my investment($31,800 down payment).

OK that all seems to look good on a worse case even though the rents seem high for the neighborhood, and I’ll need to play with the numbers a little bit more, my question is…

Since there doesn’t seem to be any comps. in the area for this type of property, what do I use as my starting price for my offer?

Thanks

Brian,WI

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Re: I may be setting the market price-Help - Posted by rei_wi

Posted by rei_wi on September 30, 2003 at 12:14:23:

What neighborhood are you working in?

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Re: I may be setting the market price-Help - Posted by ken in sc

Posted by ken in sc on September 30, 2003 at 10:57:32:

Your maintenance may be low. 3 units and only $1440 per year? That may not be enough and I dont see any $$$ put aside for a new roof or ht/air down the line.

I do like your strategy of buying in a neighborhood that is turning for the better. The upside potential for equity can be great. Check out David Schumachers book called “Buy and Hold” which talks about this theory at length.

Ken

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my views - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on September 29, 2003 at 14:45:25:

Brian–(WI)-------------

If you can’t find comparables, neither can your seller. Since the numbers looks good from what you have said, you could, it seems, pay the full asking price and do ok.

I know that in a mild market or balanced market that single family houses typically sell for 5-8 % below asking prices. So, you might want to offer about 9-12% below asking price.

If you think that there is a chance that the demand for the properties is strong, you might want to offer closer to asking price.

Good InvestingRon Starr

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Re: I may be setting the market price-Help - Posted by Brian,WI

Posted by Brian,WI on September 30, 2003 at 15:40:42:

Why do you ask what neighborhood I’m looking at?

Plan on stealing my deal???

Just wondering.

Brian,WI