WTH I am over my head

[MichaelC 160]

Unfortunately, rents are not part of the public record as are purchase price. Start with a look online and in the local papers to see what comparable properties are asking for rent. If that doesn't give you enough info, call a local rental agent and probe around for what the FMR might be.

[DeeLight 8]

Ok time for some updates. I am totally confused about now. It's all goo. Part of the learning curve for me.

 

Here's what's so right now.

 

Seller----who has an auction bidding & purchase biz for agents and investors, says he has an agreement with the present tenant for $1050 rent (this can be contractd when new buyer purchases);

 

public housing authority says rents in the area are at $900

 

So I went and looked at the comps again. I didn't know how to evaluate comps using $$ per sf. Based on that figure $100 in this case the approx price for this property is $139k.

Here's the comp stats all sold within the last 2-4 mo (without investor comps):

This home:

2&2 1,594 sf, lot is 17,500 $ per sf $100

Comp #1

3&2.75 1318 sf lot 6,413 $per sf $102

SOLD for $135----adjusted price per sf$ $163k

Comp #2 (closest comp???)

3&2 1513 sf lot 19,800 $ per sf $89

SOLD for $135----adjusted price is $142

Comp #3

3&2 1322 sf lot 6,710 $ per sf $85

SOLD $135-----adjusted price is $136

Comp #4

3&2 1574sf lot 6,270 $ per sf $74

SOLD $116k-----adjusted price $117

The guys that brought this to me have an auction bidding company serving realtors and investors. They say that the discount on this property @ $130k is about 15%----I think they'd take $125ish for a fast deal.

The responses from the Biggerpockets forum from the buy and hold guys (after they told me it was a terrible deal and all but said I was an idiot):

 

 

If you are just trying to find out whether a deal is even worth presenting to a potential buy and hold investor, a good rule of thumb would be to just know whether or not the property will yield monthly rents of at least 1.5 percent of the total acquisition cost including any rehab costs to the buyer. The buyer can work out the details from there and make their decision. But using this metric, you won't look like an idiot in any case.

 

If you are paying anything like 132k for this property you should be getting 1320 to 2640 in gross rental income for this to make sense as a good investment. Properties in excellent neighborhoods tend to be purchased at the 1.5% of sales price point and those less pricey properties in less desirable neighborhoods tend to generate 2% of sales price. ( that includes any rehab)

 

Pay attention to the info posted on the 2% 50% rule. part of which states that expenses exclusive of mortgage payments will run 50% of the gross rental income. Expenses include taxes ,insurance vacancy, maintenance ,and property management to name a few.

Most investors that will buy this property to hold will use a similar evaluation method. Investors will take less return on rental income if the prospect of a profit on sale is likely.

 

So I really don't know if it's a good deal or not now.

[MichaelC 160]

The buy-and-hold guys have a different perspective than you. If I understand, you are planning on buying and holding, correct? So you need to concern yourself with whether or not you can flip this property to someone. Taking it as a Pure Option eliminates any risk on your part. Of course, that's only part of the equation. You still need to make a profit and you can't do that unless you find a buyer. The question you need to ask yourself is whether or not the terms you are offering are attractive enough to do so, and in a reasonable amount of time.

[DeeLight 8]

Michael, I answered within text here.

 

The buy-and-hold guys have a different perspective than you. If I understand, you are planning on buying and holding, correct?. I was going to market this to buy and holder investors. Seems they are giving it the big thumbs down----very unexpected to me. So you need to concern yourself with whether or not you can flip this property to someone. Yeah, that looks like a no. Taking it as a Pure Option eliminates any risk on your part. Of course, that's only part of the equation. You still need to make a profit and you can't do that unless you find a buyer. I am not sure where to find a buyer if investors don't want it. Where else would I market it---I guess I could try to find a regular end used buyer.Huh, hadn't thot of that. The question you need to ask yourself is whether or not the terms you are offering are attractive enough to do so, and in a reasonable amount of time.

 

Thanks so much!

[MichaelC 160]

Dee, my post above should have read, "If I understand, you are aren't planning on buying and holding, correct? The point I was trying to make was that the buy-and-hold investors will understandably have a different perspedtive than someone looking to quick flip the property. So keep that in mind when they are giving their opinions. The market will tell you whether or not you have something of value once you begin getting the word out with some marketing.

[DeeLight 8]

Yes, ok Michael. So funny, the learning path. The sellers presented this as an investors deal so when investors panned it I didn't think about it possibly being a straight retail deal.

 

We'll see how it goes