Re: Vaughan - Posted by JohnBoy
Posted by JohnBoy on July 22, 2003 at 10:48:00:
So if I had a house that justified a sale price of 150% of FMV, based on “cash flow”, even though comparable comps support less, you would gladly pay me 150% of FMV because the “cash flow” supports paying it???
I don’t know about you, but regardless of how much the property cash flows, I would never pay more than FMV based on comparable sales. If a house is only worth $100k I’m not going to pay $150k for it just because they may have a renter paying higher rent that could justify a higher than market value for the property. I would just buy another house and get my own renter and end up with a better deal.
The article is about SFH’s, not multi-units. Naturally, if the SFH has a FMV that won’t support the rent for the area, I’m not going to buy it for a rental. But regardless of how much rent it generates, I’m also not going to pay a higher than FMV price based on comparable sales. I don’t care how much it cash flows, if it’s only worth $100k based on comparable sales, it’s only worth $100k.
Like Bronchick pointed out. There are investors buying rentals that generate $400 rents they are paying $15k for the property. $400 rent would support a much higher price than $15k. So are you saying you would gladly pay a lot more than the $15k just because the rent supports it, regardless of the fact the property is only worth $15k???