Need advise on househacking 2 unit property

[Venesa Ocasio]

Hi everyone, I’m new to the BP forum and I am seeking some advice on whether or not to purchase a multifamily 2 unit property. I found it on the mls for $375,000. My husband and I went to see it yesterday and it’s in need of at least $75,000 in updates or more. It has two separate apartments with 3br/1.5 baths. Separate utilities. One unit includes a finished attic and they both have a basement. They both need a complete kitchen remodel and bathroom remodel with new flooring in both apartments. Currently the renters are month to month and their rents are below market $1,000/$1300. The sellers realtor stated after remodel the rents can go to $2,000. This is in Illinois in a great market with rated 10 schools. My husband and I would like to live in one and rent out the other. The original price on it was $450,000 and she lowered it to $375,000. The seller was given this property by her grandfather and she realizes it needs ALOT of work. She wants to get rid of it. My question is what is a good offer? Sounds like the seller is very open. Also, we have to sell our home and would want to add that contingency and the seller is also open to that. Does it sound like a good deal? A similar property on the same block is listed at $450,000.

[George Skidis]

You can always offer too much and get the deal accepted. 

In Southern Illinois my offer would be along the lines of 5 to 7 times current rents. Personally I never offer more than 5 times rents. However, you will also need to factor in the location and what it means to you personally. No one can do that but you.

Sounds like rents are currently $2,300 a month. So $2,300 x 12 =$27,600 x 5 years $138,000 or 7 years = $193,200.00 as an investment property.

Raise the rents to $4,000 a month and you get $48,000 x 5 = 240,000 to $48,000 x 7 = $336,000 value. 

So my offer would be around $279,000 to $299,000 to start out.

Do not worry about offending the seller with a low offer. Do your research. have a reason for what you are doing and step up to the plate. The worst thing they can do is say no but hopefully they will say yes or make you a counter offer and the negotiations can begin.