Is it an insult to make an offer based on the income?

[Brian V.]

Hi, there is a 4-plex I'd like to buy. However the asking price is a rich $920,000. I figured out based on NOI, that if I put 3.5% down as an owner occupied FHA loan, that all I can afford to offer is $500,000. He posts his cap rate at $920,000 is 4%. Its a fairly desirable area in Southern California and the complex is in good shape.

Do I offer $500,000 which the NOI covers including PMI (and we are paying full price montly rental for the unit we live in)...or do I not offer because I might insult someone? If I sell my house, I can cover the down payment and purchase expenses and have about $40,000 cushion in the bank for emergencies.

I'm really interested in house hacking, and I've read many articles, listened to podcasts, and heard many success stories about it. The problem is I live in Southern California and people seem to want top dollar for paltry rents. Most of the income properties that cross my desk are very old and ugly. This one I"m interested in is pretty and exactly where I want to live.