Want to make this my first offer-but need advise

[Bert P.]

Hello all.

After much reading, surfing, numbers running, I believe I have found the property to make my first offer on. It is a 5plex in a C+ area in Phoenix. Externally it is in really good condition. As it is supposedly fully rented an accepted offer is required to see anything inside. The numbers as stated by seller:

All 1 bedroom, 1 bath, about 600 sqft
Asking price---$225,000(too high from what I can determine online)
Annual rents--$23,700.00($395.00 unit)
Stated NOI----$8024.00
Stated expenses--$16,838.00(statement in listing that this is high "due to some work done on 4 units.")

Local bank commercial financing. I want to offer $170k, which seems reasonable for the area and sellers stated numbers. My realtor will offer it but doesn't want to offend. My feeling is that without accurate numbers per the seller statement and similar properties in the area, I shouldn't make a full price offer.

If I use the seller's numbers I come up with a 3.5% CAP-not so good.

My biggest question is this-make the offer and if accepted, let due diligence determine actual potential? Or, pass on the property? Or....other thoughts.

I think I'm missing something and am starting to over think. What say my brethren?

[Bert P.]

Joel Owens Thank you for the reply. Your mention of the cap expense is exactly what I was thinking. I'm not worried about my realtors emotions, just mine. All else fails, there's plenty of realtors around.

I would be using commercial financing with local bank. Landlord pays water/sewer and landscape maintenance. I believe this can cash flow well, but certainly not with the stated numbers. If the offer is shot down I will just move on. If accepted or countered, I'll assess and proceed with due diligence. Thanks for you help.