Valuing 4 Properties - Need Help!!

[Brandon Foken]

I'm finally getting some phone calls back from my direct mail pieces and one of my first calls was an interesting situation. The gentleman who called me owns 4 properties all on the same block on 41st Avenue in Oakland, CA. The details for each property follows:

- 4 Bed / 1 Bath SFH - rents for $1,600
- 1 Bed / 1 Bath SFH - rents for $1,200
- 1 Bed / 1 Bath SFH - rents for $1,200
- 3 unit property all 1 Bed / 1 Bath - average rent is $1,200 per unit

All of these currently have tenants in place (so he says). So now my question concerns evaluating this properties. Would I value these properties like a rehabber or would I value them if I were to buy-and-hold? The answer seems obvious, but I want to make sure I'm using the right criteria when determining their value.

I've read so much about how to determine an offer price for a standard fix and flip (70% of ARV - Repairs = MAO) but there hasn't been much discussion on how that differs from valuing a buy-and-hold property. My initial stab is to package all four of these up and attempt to purchase so that rents would be 1% of purchase price (actually slightly higher to allow room for my wholesale fee).

My cocktail napkin math shows that rents equal $7,600. That means in order to get 1% rent, the end buyer would need to purchase at $760,000. If I take a 5% wholesale fee (just throwing out a number) then I would need to get under contract at $722,000.

Obviously there is much due diligence still to be done, but I need to give my prospect a call back this afternoon with a ballpark number to see if it's worth scheduling a showing around the current tenants. Can someone let me know if I'm close or way out of line with my initial assumptions/valuation techniques? Any critiques are greatly appreciated!