Wisconsin- low appraisal a deal breaker?

[Matt E.]

Last night the appraisal came in ahead of my first deal. The property was valued at $153,000. My offer was $178,000. The 2010 appraised value was $172,000; rent has increased and they've made improvements to the property since then.

The seller is a friend of my mothers. She's been my mentor and was going to be my property management as well.

Is there anyway that I can still make this deal work? I live overseas so maintaining this relationship is especially important to me. Nevertheless, I don't want to start my investing career with a poor buying decision.

I would really appreciate if anyone could steer me in the right direction.

Thank you.

[James Gefke]

What type of property are you looking to buy and what city is it located in?

If it is a single family and you pay 25k over market value you will have limited exit opportunities available. Also I would think that it would be pretty difficult to earn reasonable return at that price level.

The other item that would concern me is the method you plan on using to purchase the property. A 5/1 arm at 4.75% could be much more expensive when looking to refinance when the term is up.

Property taxes are rather high here as well. Just make sure you work all the numbers out and if the deal makes sense you can move forward with it but if this your first deal and you haven't looked at numerous other opportunities I would hold off.

the 1031 should be no concern of yours and frankly I would be a bit skeptical if someone I knew was willing to sell me a property at 25k over appraisal and then manage it (presumably for $$$) I would definitely wonder if this is first out of area investment in real estate that I would like to make :)