Am I missing something or is this a bad deal?

[Hyuma Leland]

Hi all, a real estate broker-agent and loan originator I have been working with have sent me a deal that they insist is a great deal. I have run the numbers myself and don't see much upside on this as a long term hold unless the price was significantly lower. Maybe I'm missing something or are they mistaken? Los Angeles suburb triplex. Seller is a fix and flipper, looks like he picked it up for ~305,000 last year. Two of the units have been rehabbed and are vacant. The third is rented at 750/mo (rent controlled) but could be delivered vacant. Based on rent comps I estimate rents of 1350/mo, though the seller is touting 1500/mo Price $550000 Repair: $15000 ARV: at market Monthly gross: 4050 I'm really struggling to see what I'm missing here. The agent is telling me the property is priced at market (which I agree) but maybe the market and comps are all overpriced? Is this a fundamental disconnect between estimating value based on comps vs. CAP rate? If so, how do I reconcile this? Thanks BP community!

[Chris Pasternak]

2% rule says you need 11k in monthly rent for this to be a solid deal if you purchased at 550k. I'd say you need a serious price cut or to move on. Not only that, but you need 15k in repairs? Meh.

Moreover, the current seller's purchase price (305k) and rents you project (4050) don't warrant a deal either!