Crunched some #s for my first property

[Kevin R.]

I'm looking to buy my first-ever property, and I found a triplex in Philadelphia that I really like. I crunched some numbers (http://bit.ly/1Rhx4zW) using a modified template from @J Scott. The property is currently listed at $420,000. Based on my number crunching, I'm thinking that an offer of $370,000 with a 3% seller assist would work for me, which would be about 14.5% lower than what it's currently listed for. Does that sound like a somewhat reasonable offer? Any feedback that the good people of BP could give would be greatly, greatly appreciated.

Here are some assumptions I made:

• The three really important numbers are highlighted in blue at the bottom: net operating income (NOI), total cash flow, and total return.
• I'm treating this property as an expense rather than an investment (since I'll be living there), so I'm not overly concerned about obtaining positive cash flow while I live there.
• The one number that's still in question is the insurance - Liberty Mutual quoted me $3,500/year, which seems incredibly high to me. I'm going to shop around to see if I can find something better. If I can get that figure down to $1,500-$2,500, my cash flow would look a lot better.
• Until I actually take a look at the property, I'm assuming minimal up-front improvement costs ($2,000).

Also, I had a miscellaneous question - I did a bit of research and found that it's an estate sale. I found the obituary of the gentleman who owned the property and saw that the names of his surviving family members were listed. Do you think it would be inappropriate to reach out directly to a family member to try to get a number out of them that they'd feel comfortable selling at? I'd imagine that they'd want the property off their hands - one less thing for them to worry about.

Thank you, BP!

[Lucas Pfaff]

Hey Kevin,

A couple thoughts...like @Account Closed said, you probably want to account for PM and CapEx up front. Assuming I did my sleuthing as well as I think I did, based on the current state of the property as well as the neighborhood, I would account for double the annual repairs you have listed.

On the other side of things, I think your rent estimates are fairly conservative and I'd think you could get $1,300+ for the 2BD units. This is my opinion and just something to consider rather than me encouraging you to change your projections. 

Lastly, based on the listing (without having spoken to anyone), I see no reason not to come in with a low offer, particularly as it's an estate sale, it's been listed a long time, and there haven't been any price drops. For what it's worth, with the information I have now, I'd probably come in around $250k and try to negotiate them down to ~$300k (don't forget, you make your money when you buy). Beforehand, I'd reach out to the listing agent and set up an appointment. After you've viewed the property and tightened up your rehab estimate...ask if they've received any offers and try to dig for whatever information he will share. The listing agent is likely a court assigned real estate agent and just wants to get the property sold. The family might jump on any offer they receive at this point.