Less than 1%

[John Blythe]

Hey all,

I'm looking at some property that is in an incredible part of town and has been on the market (off and on, I think) for 6 months now. There are two or three duplexes being sold by the same seller, so they seem to be getting out of the game or moving on to other areas of interest. Motivated to some degree due to the length of time, perhaps, but also fully occupied so not rushing. I'm guessing they're holding to their price and others have found it to be too high. Or perhaps something is wrong w the two properties that I've been eyeing. I'll hopefully do a walkthrough soon.

When running the numbers, it's coming out to the ~.8% range. I know the 1% is a rule of thumb and has some margin built into it, but how low is too low to go? I checked out comps and it seems like rent is on the lower side of the scale for the area. Not incredibly low, still in the reasonable range, but towards the bottom. You should be able to see it here: https://www.rentometer.com/results/1RVuljglqhU

So, if I can't get the seller to come down, how do I go about getting the rents where they need to be to get the numbers to work out better? I certainly don't want to show up and wreck the setup that current tenants are enjoying, have to find new ones, etc. if it's avoidable, but of course need to make the cashflow work out. The location and (seeming) quality of the properties is great, so I'd really like to find a way to make it work if there is little to no room for negotiating the property's selling point.

Thanks for any info!

[Larry Turowski]

@John Blythe That sounds too low to me.  Indiana isn't exactly an appreciating market, as far as I know, so you really need to make sure it has a good cap rate--minimally 7% I'd say.