Is this a Good Deal! - Posted by Dennis

Posted by GL(ON) on March 12, 2002 at 16:47:38:

It sounds like a good deal to me. How does it compare with similar properties that have sold in the last year?

You will have to research the income and expenses in more detail, then work out what your cap rate and cash flow will look like. But it looks like a winner to me.

Is this a Good Deal! - Posted by Dennis

Posted by Dennis on March 12, 2002 at 16:02:18:

I have an opportunity to purchase an eight family unit. Here are the details…seller wants 199K. Terms are not identified. Property is in excellent condition and in a great area of town. Yealy income potential is $40,500, based on 450 x 8 - vacancy average over the last 5 years. Yearly expenses are $12,000, based on Taxes = 5k, Utilities = 4k Insurance = 1k, management = 2k.

I am going to offer 150k…25k down on a Land contract at 5yrs ballon, 360 month amorization. Is this offer too low or in the ball park. I want to submit this in the morning. Good Deal or Not!

Re: Is this a Good Deal! - Posted by Don (Fl)

Posted by Don (Fl) on March 13, 2002 at 08:15:35:

Word of advice. Never, ever base your offer on “potential income”. Base it on actual only. Potential income is your profit! The only glaring expense missing that I see is maintenance. That can be as high as 8-15%. Maintenance isn’t just lawn work, paintng exterior, etc. Maintenance can be replacing the carpet and repairing damaged walls or replacing the appliances a disgruntled tenant stole from you as he/she moved! I always figure in 10% for maintenance. If I can keep it lower, again that is profit!

With that being said, yes it looks like a good deal.

Good luck,