St. Petersburg Triplex Analysis. Feedback!

[Tim Kaminski]

OK.  Found what I thought was a deal.  Upon closer calculations, would have to offer $85,000 less than asking price to achieve cash flow of $100/door goal.  Would just love to put my numbers up and see if there is anything I am doing wrong.  I feel making an offer that low isn't even worth it.  

Would appreciate any feedback!  Looking for first purchase!

Triplex Deal?

[John Leavelle]

@Tim Kaminski

You would not be wasting your realtors time having them run comps for you.  That is what they are for.  As an investor you may go through analyzing 10-20 properties before your able to submit an offer.  Your realtor should know this.  If you have you need to develop a list of criteria for properties your are interested in.  Provide that criteria to your realtor.  Have them send you list of properties that meet those criteria.  Make sure they understand your analysis method and requirements.  Knowing what your criteria is will show them you are serious.

You need to establish a true Market Value for the property.  If the list price is at market value, then, move on.  It is a losing proposition.  There is now way to make the property Cash Flow without putting a large down payment.  However, if your comps show a much lower Market Value, then, you have better negotiating power.  You would be surprised how many Sellers start with a high List price.  Then eventually start dropping and dropping, and dropping the price because it will not sell.  I think a lot of them over paid to begin with.  Remember this is a rental property and it must be able to Cash Flow.  If the rents are at market rates then you have little room to improve the income.  The seller should know this.  There are three other possible adjustments that can be made to make it cash flow.  Reducing expenses, increasing your down payment, or reducing the purchase price.  Reducing expenses are for after the purchase.  Increasing your down payment is ok to an extinct.  You should not be required to put down more than 20% (not really an option for you).  That leaves the purchase price.  If you and your realtor establish real good comps showing a lower Value, then, more than likely the Bank Appraisal will be close to it.

Also, you need to evaluate the condition of the property. Will there be significant CapEx items in the near future? Or is there more immediate repairs needed that your $5,000 will not cover? The only way to really know is with an inspection.

Let me end this by saying there are basically 4 price points a lot of investors use.

List Price - What the Seller wants for their property = $245,000

Strike Price - The highest price you are willing to go with minimum cash flow ($100 per unit?) = ? This could be the real Market Value or a little below that.

Goal Price - The actual price you really want = ?  The price where you can cash flow $200 per unit maybe.

Offer Price - Your starting point for negotiations = $160,000 (65% below List)

My offer prices are almost always 60-70% below List Price.  But I look for distressed properties.  Don't get me wrong.  I am not trying to rip the sellers off.  But trying to purchase at a fair price relevant to the market and condition of the property.  That is why it is extremely important to establish Value based on comps.

Oh yeah.  You are correct.  You do need to analyze the cash flow as if your not living there.