How much is enough cash flow and what to offer?

[Alon Rokach]

Hi BP,

I am in the midst of potentially making an offer on my first property purchase, I was hoping someone could shed some light on a problem that I am having. Hoping to put in an offer on a 6 unit building and struggling to find the right amount to offer. The property is in good condition and doesn't really need anything significant except a new water heater in a few years. 

The unit is priced at $279k, NOI is $21,878 - debt service, which we estimate will be $1062. That leaves us with $89/door. Question is, what is the minimum that you would accept per door and how do you determine what to offer?

I know most people don't touch a property unless they are getting at least $100/door, but there is room to make improvements and raise rents. That being said, I know you buy a property based on what it is worth today and not what it could be worth.

Unfortunately there isn't much else in the area to determine a GRM.

Just want to make sure we don't offer more than what the bank will give a mortgage for the property. 

Thanks in advance!

[Jaysen Medhurst]

This property is valued at a 7.8% cap rate, @Alon Rokach. Is that in line with similar properties in your area?

$89/door would not be enough for me. What do yo think you can get that up to? How much will it cost?

I like to see at least $150/unit/month and a CoC ROI in the mid-teens or better.