Establishing smart purchase price for derelict multifamily?

[Ben Ballinger]

Imagine a 3 flat that is completely boarded up, fully vacant. How do you determine a proper purchase price? Let's assume we have priced out the rehab, time from close till rented, rental rates, etc Also, let's assume there's not a lot of comparable sales in the area from which to easily determine these values. I feel like it's easier to determine purchase price for a property that's already renting, but for a derelict property I'm not really sure how to determine which deals are worth looking at. I can run an analysis on the property but it still doesn't take into account the fact that it's not renting from day one. Do I just perform the analysis as normal, but add three months of holding costs to the "price" since I assume that much time before any income is generated? As example (just using rounded numbers for simplicity) Asking price 120k rehab cost 100k Monthly expenses (not including loan payment/interest): 3.2k Monthly rents (once filled) 5k/mo Let's assume utilities paid by tenants, so lets say monthly expenses while vacant are same as when rented, would I just add 9.6k (3.2k * 3 months) to my total acquisition costs in the analysis to determine proper offer price? Or is there an element I'm missing in this?