What am I missing here? Duplex deal question

[Henry Kicera]

I'm trying to figure out what I'm missing.

Duplex for sale. Comps put it in the $136-140 range.

Listed for sale on MLS for $160k in sellers market

Gross rent $1,700/mo. Market rents.

I offered $136k, planning to finance. Don't have all the cash on hand.

Got an email from the agent asking why such a low offer?

I emailed back (even though I didn't have to explain) with attachments showing the comps, and how I thought the market doesn't support the list price, and that I didn't think a bank wouldn't appraise the property for much more than what I offered if at all higher.

Offer rejected outright. No counter. I wasn't interested in submitting a higher offer, I didn't want to overpay, even though the property would cash flow ok financed at list price (if it even appraised for that).

Property currently pending 4 days later with what appears to be a cash offer. I'm assuming it was list price offer based on the exchange I had.

What am I missing?

It doesn't make sense to me to seemingly over pay on an asset, and have negative equity off the bat? I don't think the market would support higher rents. The property was in good shape, no repairs to be made.

I understand getting 10% on your money, but the stock market is even out performing that right now.

Forgive me if I'm missing something, I'm just trying to learn.

Thanks!

[Marcus Auerbach]

@Henry Kicera overpaying is a relative term. You could have said the same thing three years ago with lower numbers. I don't believe in timing the market and you can only buy the best deal you can in the market you are in. With rents at 1,700 and no reapirs needed a $160,000 asking price seems very justifiable. Be careful with comps to account for condition. You might buy one of the comps for 130k and the find yourself spending 50k in upgrades in the next 2 years. But that is all speculation on my side, I don't have the facts.

What puzzels me more is that you seem to work without buyers representation. Not speaking with the listing agent before making an offer is a rookie agent mistake. I always know before I make an offer if we stand a chance. The listing agent wants to sell it as much as you want to buy it and they know if an offer is worth presenting or not. The trick is to find an agent, who is also an investor and "gets it". But that's why you are on BP..

Again, I am not advocating for "overpaying" - you do this for profit. I bought a property for myself last week, single family, great schools, comps in the 240s, asking 157. Home in original condition from 60s and with major basement wall issues. They had 14 offers in 3 days, most from flippers, they went two rounds, I think I had 5 or 6 phone calls with the agent that day, he certainly did not tell me what the other offers were, but I had enough of a sense to know it is competitive as expected and we built great rapport; got it under contract for 161k cash and no contingencies, which aparently is 50k more than the lowest offer they had (flippers with hard money - agent had been burnt before and disliked hard money to begin with, wanted to see actual funds in my account). We will reapir the basement, gut the rest of the house, spend about 60k and then rent it out for 2k. Did I spend more than I would have to 3 years ago - absolutley yes. Did I overpay? I don't think so, it will cash flow, is likly to appreciate well over the next 30 years and will de-leverage over the next 25 years, meanwhile providing tax shelter for the rest of my portfolio.