Please help with potential first deal

[Quinten Jones]

Hello everyone,

I have connected with a friend of a friend who is an older gentleman who owns Real Estate pretty much all over Nevada County, CA. After explaining to my friend that I am getting started in the Wholesaling business, she was able to get this gentleman to call me.

He wants to sell a property that contains 4 Rental Units that sits on a commercial lot in a very convenient location in Grass Valley, CA. The rental units (small houses) need some rehab, but not a whole lot - Mostly Cosmetic and some curb appeal. He is asking $450,000 for the property. He mainly wants to get out from beneath it because he is older and does not want to be a landlord anymore.

My question is: How should I go about in analyzing his asking price? Realizing that the property is zoned for commercial, there is potential for future development. Researching rent in Grass Valley, I believe each unit could be rented out for $725.00 yielding a gross monthly profit of $2,900.00 before expenses. Any help would be appreciated. Thank you.

[Elizabeth Colegrove]

@Quinten Jones

Definitely do some reading around biggerpockets before you start!

Everyone is different with your rent versus purchase price requirements. Based on what you are describing I would say the area is not the best based on your rents. I am in the central valley of California, my $165,000-$220,000 houses rent from $1450-$1800. Although they aren't consider to be the best ratios, they work well for me because my taxes and insurance are very low. My houses are less than 10 years old and the clientele are high level professional (military, federal employees) who are here for 1-5 years and don't want the burden of renting.

So based on those factor I am okay with the rent that I am getting. Based on my example, I would recommend you research the commercial value of the property. Not only due you need to see the "value" but also the demand for the area. Personally in your position I would make friend with a local realtor. You can give her referals that don't work for you and she helps with cmas or whatever you work out.

I wouldn't be surprised if the gentleman is GREATLY overvaluing his property too you. Without being rude or difficult there is a reason why he is choosing the "newbie". At the same time it could be just the right place at the right time. That being said, if he owns a ton of real estate. I have a feeling that he is very knowledgable!!! Make sure you get everything checked out so YOU are not being taken advantage of!