Should I pull the trigger on this deal.

[James Zhang]

All,

I came across an opportunity that has the following numbers.  I am trying to figure out if I should pull the trigger.

Neighborhood: C+/C

Asking Price: $40,000

Monthly Rent: $800

Last year's taxes was $851

Annual NOI: $5,229 (10% reserve, 8.33% vacancy, 10% management fee, $800 insurance)

So, everything looks good at this point.  There is one concern i have.  The county's tax assessment is $32,000 for the property.  I understand that i am paying for the cash flow so i shouldn't look at the assessment value.  Somehow, I am having trouble reconcile the number in my head.  Should I give too much weight on the county assessed price?

The reason this came up is because the bank i am working with only lends on the the lower of purchase price or county assessment, like most banks.  So i can only borrow 75% of $32k.  

This gets me an unlevered return of 13% and a leveraged return of 23%

Should I pull the trigger?

[Byron Bohlsen]

I haven't heard of a bank using a county assessment for a purchase loan. Are you thinking of an appraisal? 

That said county assessments almost never match market value. The county assessment is off by 60k on a place i just bought and its not a super spendy home.