Estimating purchase currently at Net Operating Loss

[Stephen R.]

I'm looking at picking up a 4 family, 12 BR, 4 BA as a first purchase. It seems the current owner, who inherited the property and seems to know less about valuation than this aspiring investor, has been operating at a net loss. It seems the family member he inherited it from didn't operate it much better. (read: slumlord) I tried searching the forums for posts using the keyword NOL and haven't come up with much. 

The property is rated C and is only 25% occupied. The other units look like gut jobs (hence the reason they are unoccupied) and will probably rent for $1300-$1400/mo when completed. (The occupied unit is currently at $1300) I have to be careful because despite the rehab the neighborhood won't allow much more. I'm estimating $100k in rehab. The seller actually has 5 properties in similar states of distress and I've love to wrap them together into one blanket mortgage, exceeding my goal for the year. (Too ambitious for a first deal?) 

It has been on the market for over 4 months, is owned free and clear, and based on my analysis I'm coming up with a offer price of about 45% of the original asking. (And even that may be generous) He has received no offers to date. The seller obviously has wild fantasies of the property's true value but, at the same time, wants out from under it. (read: opportunity) Using the BP calculators has been difficult because I'm trying estimate operating income differently before, during and after rehab. 

So I guess the question is- how do I calculate an accurate offer price for a property that is cash flow negative? 

Part of me thinks I'd be doing him a favor offering $3 and a slightly melted Snickers bar... 

[Travis Paez]

Being that it is a four family, an appraiser would probably use comps in the area rather than the income approach for valuation. That being said, you should look at both.
To be safe, once you find the value, either by potential income or comparables, you base offer might be 70% minus repair costs. If this offer is too low for the seller, maybe he would consider a higher offer if he finances the deal for you or if you are buying his whole portfolio, or both.
For example, you can definitely afford a higher purchase price if he's giving you a three year no interest loan(with a longer amortization) in which time you can renovate, rent and refi.