Buy & Hold Question-What Should I Offer

[Rita Solomon-Moore]

GM Everyone,

Looking at trying to work out my first deal (hopefully it is a deal). Not sure of the overall numbers, but I have been working out some variations for the last couple of days. There are 5 properties being offered (one owner), all currently SFR. Only one of the 5 is currently not rented. Individual asking prices are ($199.9k; $239.9k; $269.9k; $209.9k & $249.9k). Current owner is offering package price for all 5 (still waiting to hear what that number is). Each needs work of some type, current rent for 4 of the 5 is $5330. I'm thinking with a good rehab on each that rental number could go up to at least $7400).

Where I am uncertain is the appraised value, as the homes look like they have not been well cared for, so they may come in under asking.  Here's where others expertise would help me.  Not withstanding the package price, what would be a good offer price for the properties?  

[Nathan Gesner]

@Rita Solomon-Moore you have to learn how to evaluate the cost and expenses. Have you used the free calculator provided by BP? That would show you these are probably not a good investment.

A common rule-of-thumb is the "1% rule" that investors use to quickly evaluate a property. You usually want a property to rent for 1% of the purchase price or better. A $200,000 home should rent for $2,000 a month. This only works in certain markets so you have to learn your market and adjust accordingly. In my market, I can only meet the 1% rule if I purchase something well below market value. NOTE: the 1% rule is not a hard-and-fast rule! It's a way to eye-ball a property quickly to determine if you should investigate more or ignore it.

I think you would be better off finding a REALTOR with experience in real estate investing. It took me one minute to find 4226 W Highland Blvd which is half the cost, fully renovated, 100% occupied, and producing twice the income of your proposed purchase. It may not be as good as it looks on the surface but it certainly looks like a much better deal than what you're proposing.

Find an investor group and someone that can mentor you. Find an investor-friendly REALTOR to help you find deals. Find a Property Manager to help manage them.