Thinking of Making an Offer

[Chris DeHaan]

Hi Everyone,

My good friend and I have been looking to buy a house together for the past couple of months. We are located in the SF Bay Area where average homes regularly sell for over $1M, thus the desire the purchase together. I stumbled upon a multi-unit building in a desirable area of the city this weekend, and I am hoping to get some advice about how to go about making on offer:

The property in question has three units: a 2bd/2ba on the first floor, a 3bd/1ba on the second floor, and an unwarranted 1bd unit on the top floor/attic. All three of the property's units are currently leased for a total of $6700/month. Similar units comp at $3800-4000/mo for the 2bd/2ba, $4500-5000, and $2000 for the 1bd. The rental market here is extremely hot right now and I don't expect much rents to increase much from where they are now.

The building is listed at $999k and will need some updating. The seller's agent sent me the disclosures today and said that it will need some work based on a property inspection that they had performed. If the third unit was warranted, it would compare to similar buildings selling for $1.5M-2.0M.

Our plan would be to operate the building as a buy-and-hold until we could get the current tenants to move out of the 2bd/2ba unit. Then, we would live in the 2bd unit and rent the other units out to cover as much of the mortgage as possible.

1) We aren't currently working with a buyer's agent. Should we involve another realtor to make an offer?

2) By buying together (with some sort of a TIC agreement?) would we lose the ability to claim a mortgage interest deduction on our taxes?

3) I expect fierce competition on this property based on its below market listing price. Should we go in and offer above asking right off the bat?

Any and all advice is greatly appreciated!