Posted by Jim Locker on December 30, 2000 at 11:53:11:
Value depends on location, within limits. Generally, a good location gets you a more favorable market cap, which results in a higher valuation.
But 1.3 Million is out of the ballpark for any realistic market cap. You might get the property to support a 1 Million purchase price if the area is good enough, and 850K looks alright to me.
I would be very surprised if you can get anyone to give you a cash out second on a deal like this at the 850K price point. If you find anyone who will, please post the info since I (and others) would like to know how you did it.
I need some help obtaining a second mortgage for a property that I am looking at. The property lists for $1,333,000 and is comprised of 2 - 2-flats and a building with 4 storefronts and 4 apartments for a total of 8 apartments and 4 storefronts. The gross income of the building is about $120,000 and could be higher because the owner lives out of state and has let the property slip a little bit as far as rents. The owner has oftered to sell me the property by taking back a first mortgage of his own for the balance of the deal less $500,000, which is what he needs as a down payment and I need as a second mortgage. I have submitted an offer of $850,000 for the property and would probably go as high as $1,000,000 or $1,100,000. I’m not sure that the property could support much more than that. Ideally the owner would agree to around $1,000,000 because he wants to get rid of the building, which would allow me to get possibly $100K at closing in cash. I need some help finding a creative way to obtain a second mortgage/down payment of $500,000 with none of my own money. Please let me know what you think.
The value of an income property . . . - Posted by JoeKaiser
Posted by JoeKaiser on December 29, 2000 at 18:58:24:
. . . is based on the income it generates, all things being equal.
Your property grosses $10k a month and likely nets half of that. When did $5k a month become worth $1.33m, or even $1m for that matter?
Don’t forget, value is based on current rents, not projected. You create value by raising rents, and that value belongs to the fellow who pulls it off, not to the previous owner who merely suggest it’s possible. Believe me, it may be possible, but it isn’t often easy. It may very well mean an entirely new collection of tenants, and that’s tough to do.
I’m thinking back on earlier purchases and recall buying a property that grossed $108k for less than $300k.
Re: The value of an income property . . . - Posted by Tracey
Posted by Tracey on December 30, 2000 at 10:14:02:
The value of property depends greatly on the location of that property also. This property is in Chicago where property values are very high. I’m pretty sure that this property is not worth $1.3M which is why it has been on the market for so long and why I started my offer out at $850K. From my experience here it is not that difficult to raise rates in this area because typically the units rent very quickly. The 2 studios that are being rented here for $350 apiece could be raised to $600 apiece because that’s what the property next door is getting for its studios. This is an area where SFH generally fetch around $350K - $400K and I generally don’t look at property in this area it just thought that I might be able to pull a substantial amount of cash out of this property and get some instant equity in the property because of the owners situation? Any suggestions on getting that second mortgage?