Tampa FL - Competing with Multiple offers - thoughts?

Question

Considering putting in an offer for a 2/1 and 1/1 inlaw suite at a total of 1500sqft in the Tampa area. Asking price is $150k. I am fairly confident I can rent the 2/1 for $1200 and the 1/1 for $700.  It is on a busy road. Comps nearby sell at 25% - 30% more, but are shielded by a block or two from the busy street. This house does have alley access, so you can get to it from the back. Also, to me the noise is fairly unnoticeable from the inside.

Here are my estimated monthly expenses:

Accounting Reserve

$    38

Advertising Reserve

$  50

Homeowners Insurance

$  240

Flood Insurance

$  45

Lawn / Snow

$  80

Legal Reserve

$  45

Property Management

$  152

Repairs / Maintenance Reserve

$  100

Supplies

$  -

Vacancy Reserve

$  114

Pest Control Reserve

$  25

Garbage

$  -

Sewer / Water / Gas

$  120

HOA

$  -

Taxes

$  243.95

Capex Reserve

$  83.33

Subtotal

$  1,336

My estimated cap rate is at 4.35% at asking price. Trying to be realistic with expenses - hope I am not killing the deal by accounting for too much.

This property was listed 2 days ago and there are already multiple offers.

I am eager to gain experience as this would be the first home purchase. Have viewed about 20 other houses in the area. This is the best deal I have found so far. Is it crazy to bid higher than asking? Am considering going higher (maybe to $160k), which puts my cap rate at 3.98%.

I do notice we are in a bit of a sellers market in the Tampa area - so my main concern would be buying a house that breaks even on cashflow, and then having the home value depreciate. I will be in good shape if the home value remains the same or increases.

What do you guys think? Am I too eager to find a deal that I'm forcing this one? Should I just offer a couple grand over ask and be comfortable losing the deal if I'm outbid?

Thanks in advance for any feedback.

Michael Haynes · Answer

@David Algava, Hello, the question is if you own your own home, yet? Why would you go to Hard Money Lenders at a time when home mortgage rates are 3.5%? Do you know that you can live in your home for two years and then sell it as your Residence, tax-free? Sometimes I think, from the posts I read on BP, that new investors think that "the streets in Tampa, Florida are paved with gold." Quite to the contrary. This is a hot Market because there is no other place to put your money, except hard assets or Real Estate because the banks don't pay any interest for deposits. The whole County is under new construction, like where did it all come from in the last five years? There is a Cycle with the Builders, too. They always end up over building and then they going Bust. In 2008 we had built out downtown Tampa with highrise buildings. 5000 new condos and they were all bought by Speculators and they were all empty. In Miami they did the same thing and ended up with 50,000, empty, condos and new apartments. Then, came the Crash. What zip code is that house that you found in? It sounds like Nebraska Ave. which is the wrong side of I275 to buy on. Just like South of Central Ave. in St. Pete. Would you live there? Yuk.

Ryan Dossey · Answer

Location, Location, Location. I won't comment on your cap rate as I'm in the midwest and our returns don't even compare.

Busy streets can be tempting but there would have to be a SIGNIFICANT upside potential. What have homes on that same street sold for? If the market cools you're going to own that thing indefinitely or take a loss on it. I work with guys out your way so I know that it's a very hot market.

Don't rush it. Especially your first one. It sounds like you're only looking on the MLS is that correct? If you're in a hot market you're going to have to innovate. Hit up estate sales, mail dilapidated properties, and keep an eye on the newspaper. The good ones go extremely fast on the MLS. Try and find some before they get there.

David Algava · Answer

Brian - Thanks for your comment. If nothing else, you've convinced me to lower my offer (or perhaps not offer at all).

When you mention finding people in dire straights, how often are you able to use traditional financing those kinds of deals? I would imagine most of them need a bit of work. I was told I cannot qualify for a mortgage unless Roof / AC / Electric / Plumbing all pass inspection.

On the brighter side, I suppose you only need to find one deal in 100 for it to work. Perhaps there is one out there that doesn't require much work and qualifies for traditional.

David Algava · Answer

Michael, The property is in North St. Pete in the historic Kenwood district just west of 275 - any thoughts on location? I've found that this to be a decent area and would be comfortable living there.

I agree with your comment on market status - and I know they are in the process of building a lot of luxury condos downtown.  It does point to rents going down with the extra supply.

Brian Baker · Answer

Hey David, I'm in the Orlando region and I invest across Central Florida, including Tampa.  There are much better deals out there than this.  Though this is definitely a seller's market, we still have people seeking us out to sell their properties to us at discount because they are in dire straits.  Listed properties are not the way to go right now if you want a good deal.  As they say in investing, when you see everyone run one direction (aka, multiple offers), its time to run in the opposite.  Get your marketing in order, know exactly what you want, and you will find better deals.

John Thedford · Answer

I avoid busy streets. They are hard to rent, and hard to sell. That is my personal experience but yours may vary.

David Algava · Answer

Ryan - Appreciate the response.

The comps are a bit wacky as it is a mixed use street. There are businesses, a church, a school, a lot of SFRs and 2/3/4plexes that do not seem to conform to a particular size, shape, or condition. I see a triplex across the street that sold for 150k last year (worse condition / same sqft). There is also a single family 900 sqft that sold for $70k in 2014. St Pete has appreciated significantly since 2014 somewhere in the realm of 20-50% in most areas.

I have not been seeking deals outside of the MLS. It may be worth a shot - thank you. Homes without central AC / roof problems / etc do not qualify for typical mortgage and not comfortable finding hard money on a first deal. Will have to find a way around that - or find a house in good enough condition.

Tampa FL - Competing with Multiple offers - thoughts?

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