Advice on negotiating 4plex purchase

[Mike M.]

Looking for advice on negotiating purchase of 4-plex. Property is currently vacant. I am looking at it for buy and hold or possible flip. It is rent ready, except there are no appliances.

Seller is mortgage holder who took back the property from rehabbers after they a rehab flip failed (apparently due to price decline) and then they failed to manage the tenants.

Seller evicted all the tenants this Fall and has no desire to manage the property. Has RE agent, as do I. Listing says "motivated seller, bring offers".

Total rent est is $35,000/yr with owner paying w/s/t. Seller is asking $170k, which is market value.

I am closing on a 2-unit in same area (not as nice property or neighborhood but same rent) for $65k (25% discount from mkt price).

Where would y'all start on this? I feel like starting at $120k. I'd like to get control of this property but I want to know where the risks are.

[J Scott]

Obviously you need to do some due diligence, including getting into the units to evaluate the condition yourself, do a market rent analysis to ensure the $35K/year is accurate, etc.

Assuming your numbers are correct and the market value is somewhere around $170K, what would you be willing to pay for the property?

This is likely going to depend on your goals -- if you want to flip it, you'll need to buy it with a decent amount of equity and if you want to hold it, you need to figure out what your return goals are (cash flow, ROI, IRR, COC, etc).

Once you have a number in mind, I would probably start about 20% lower than that and see if it gets a response from the seller. If it does, go from there. If it doesn't, increase your offer 10% and see what happens.

Worst case, make an offer at your max purchase price, and let the listing agent know that that's the best you can do.