Buying Retail

[Steve Bruza]

I live in Nashville, Tennessee and currently have seven rental properties including two duplexes. They provide a nice monthly rental income, but I have never purchased using the 70% rule. My approach has been to focus more on the monthly expense and mortgage rather than the sale price. My Cap Rates have ranged from 12-20%, but I always look for a 2:1 income to expense ratio (including PITI). I do like to renovate my properties to bring them up to date. I feel this brings in a better tenant and higher rent. I do yearly leases and most of my tenants renew.

After becoming a member of BP, I have begun to question what I am doing.  I enjoy using the calculators and reading about the many strategies other investors use.  I am a "buy and hold" investor, but I do see the cash flow advantage of flipping.

So here is my question, I have an opportunity to purchase the other side of a zero lot line property of which I already own one side.  The seller is motivated, but our market right now is insane.  The seller knows what he can get.  He hasn't hired an agent yet and is willing to discuss the sale with me.  If he is intent on getting 80-90-100% of the market value, is that a bad thing?  It doesn't need much work (if any) and I know what I can get for rent.  I have the down payment for a loan if it goes that way.  A cash purchase would just about break the bank.  Am I not thinking like an investor?  What am I missing with this line of thought?  I appreciate any input.