Is It Ever Ok To Overpay?

[Lauren Apicella]

As the market is heating up - at what point is it OK to overpay - or is it ever?

Here is a potential deal - Two 8-unit Buildings for sale - the numbers of each are pretty similar so I will do it for just 1 of the Buildings. This one has a new roof, and 3/8 units are rehabbed:

Asking Price: $495,000/each (Price/Unit - $61,875)

GOI: $79,200 (rents range from 750-850/month)

Expenses: $28,532 (he does PM himself - this includes a 5% vacancy and 8% in repairs)

NOI: $50,668

P&I: $1,881 (25% Down - 4.5%) - Annual Debt - $22,572

CAP - 10.06%

COC - 20.73%

GRM - 6.31

DCR - 2.21%

*On the same street, an 8-unit sold for only $310,000, & a 12-unit for $455,000 in 2016.. Definitely needed updates - not turnkey like this one. Rents are only $675/month (potential to raise rents though!), and the cap rate/COC/DCR are all still pretty similar to the numbers for this unit. Moving further out from this unit and the GRM's are closer to 6.

What are your thoughts? Would you do the deal? Or is his asking price way out of line?