Would you pay above appraised value?
Hi Everyone,
I'm under contract for a multifamily property for $300k. Bank appraisal came in at $282k. Appraisal came in low because there are few multifamily comps and they all sell at massive discount because they were never updated and need total overhauls. Seller paid for 2nd appraisal, came in at $305k, but had lots of poor appraisal practices in it and cannot be taken seriously. I can make the property cashflow nicely and to me the value is there at the current market price. It seems that paying above appraisal is considered poor practice. Does anyone have a story where it worked out for them? My deal details below.
Location: Midwest, mid-size town with a number big and small companies, hospital, heavy summer tourism. I'm extremely familiar with this area.
Property: 3 unit, all 2 bed/1bath (1 of the 3 units is not allowed as rental due to zoning. It is half below grade and very well finished with 3 egress windows. )
Cost: $300k (contract) (Appraisal by the bank:$282K)
Rent: Long-term rental: If I only rent 2 legal units min rent is $3200, if I rent all 3 units min rent is, $4K. Midterm rental possible because of traveling professionals and hospital. Short-term not allowed by city.
Condition: Built in 1930, All units are updated, newer roof, new windows, new foundations, new sewer, new electric/plumbing. I should expect minimal maintenance.
Renter Class: B
Thank you for your thoughts!