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Updated over 8 years ago on . Most recent reply

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20
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10
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Nicole Cotrino
  • Toms River, NJ
10
Votes |
20
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Considering purchasing property, but current rent is far too low

Nicole Cotrino
  • Toms River, NJ
Posted

We are currently considering a rental property in Bend, Oregon, but the current rent is far too low. It is a duplex with a list price of $332,000. Current rent is $800 per unit. It's in a great neighborhood, in good condition, and the area has an extremely low vacancy rate (less than 1%). All the research I have done (including Rentometer, Zilpy, talking to my realtor, and contacting a property manager in the area about it) has put the fair market value at $1200 per unit or more (so total income of $2400). 

As a new investor, I'm just curious what other people's experiences have been in situations like this. If I base my calculations off an income of $2400 and make a low offer, the numbers make sense to me. But, if I use $1600 total, the numbers don't make sense at all. 

Thanks in advance!

Most Popular Reply

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23
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5
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Rob Singles
  • Investor
  • Sebring / Jacksonville, FL
5
Votes |
23
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Rob Singles
  • Investor
  • Sebring / Jacksonville, FL
Replied

Whatever your offer is make sure that you price in tenant turnover, no tenant that is currently paying $800 is going to be happy about paying $1200. You will likely have to turnover both units. Also, if these tenants have a lease you need to factor in the time-frame remaining until you can even consider raising the rents. 

In a recent purchase of mine the below market rents were a result of a checked-out landlord. In that case, there was also considerable deferred maintenance that had to be remedied, watch out for this in your property inspection. 

Finally, check to make sure the rents are not low because of a rent control law or some other restriction.  

  • Rob Singles
  • Loading replies...