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