All Forum Posts by: Matthew Richey

@Matthew Richey

I took a good, hard second look at the area, the home, the comps, and I have to stand corrected.  I'm with you...I think you are in the right range.  Hats off to you for having 25K.  But for whatever reason, this seller has big ideas for the price he wants.  The spread between list and sale on your comps is much more narrow than the spread you are shooting for.

I love your idea of adding a unit, but watch out for zoning.  Make sure the city permits a triplex at this site.  It probably is, but good to check on.

The psychology of sellers is hard to predict.  I've seen sellers in my market just hold on forever until someone gave them their asking price.  But this guy seems to be in a hurry.  If your financing is solid, with pre-approvals in place, that may buy you some price reduction.  But the comps belie that the spread between asking and sale price is much narrower than a 25% spread you are going for.  Hey, I hope you get it.  

Concerning the 2% rule, what determines the 2% is your gross rents divided by the purchase price of the house.  So if each unit rents for $1100.0,  assuming you rent both, than this property at $260K is a .08%.  

You are 22, you have 25K, and you have the guts to invest in real estate, so you are ahead of the pack.  One thing to consider.  In 2006, the owner purchased it for just 52K.  He has a big capital gain coming.  Find out if he owns multiple properties in the area.  You can do this by looking up tax records, then cross reference his name to see if he owns any others.

Knowledge is power in negotiations.  If this is his only rental, you know something about him.  If he owns many, he may prefer an all cash offer because he intends to roll proceeds via 1031 exchange to another property.  I bet its the former...the impatience is there.  There are a lot of variables here still to consider, but you are off to a good start.  Please post what happens.

@Matthew Richey

Interesting.  If I were the seller, I wouldn't consider your offer.  You are 65K below asking and not offering all cash.  You have to give them an incentive to want to sell to you at such a big discount.  I also checked the comps, and I'm not seeing the same range you are.  You have to not just price compare, but compare square feet on comps as well.  I hope you get it, though, but I think you will have to raise your price, especially with financing it.

Hey @Matthew Richey. Without getting into any deep analysis, I would say the first thing you need to remember is that if you're going to be owner-occupying the property as a househack, your equation changes entirely. The goal is not to generate some kind of massive monthly cash-flow, you are looking to defray your living expenses while gaining valuable hands-on management experience and building equity in a property with a very low interest rate.

Don't start evaluating this property based on the 2% rule, 1% rule, or whatever. Instead, look at it from the perspective of: "Well, I need to live somewhere, and it may as well be "free" to me so that I don't have $1,000+ going into someone's pocket ever month." Treat extra cash as a bonus on this property. If you can finish the basement and get a studio apartment out it, so much the better (make sure that this is permitted first!). My instinct is to advise holding rents slightly under-market as your priority in this situation is to minimize vacancies so as to reduce your personal operating costs.