All Forum Posts by: Zach Melson

Hi guys, 

I am curious how you find (residential )comps in a neighborhood that does not have many recently sold properties (residential)..

-Does anyone use the Zillow home estimator (Or any other web estimator for that matter).? I've been told from an agent the algorithm the site uses for the estimate can be pretty far off.. 

 -How much stock do you take in the appraised value of the home if available on the county website?

-Any other tricks I am overlooking to comp a property that is easily accessible?

I know I can ask an agent, however, I am trying to do this without one currently so trying to throw that suggestion out the window! 

@Account Closed Right on Bob! Thank you for the insight. You're absolutely correct, I could wind up screwing myself if my numbers aren't solid. For one of the properties Im looking at I think they are. And I think the property is below market due to low rents- the property is encumbered with nonmarket(below) short term leases. 

My next question for you would be, do you speak with buyers and sellers of similar properties prior to offering on a property or do sometimes you go off your own research? 

I'm not trying to make fake numbers work, Im using what's available to me for similar cap rates for the zip code and using similar purchases based on unit price and another one I am currently looking at makes sense. 

I like the passion, keep the knowledge flowing! 

@Ian Walsh I believe thats what I am going to do. I cant justify the property with the fishy stuff surrounding it. 

@Keven Vanegas you are correct! I forgot a 0, but yes, I am willing to offer $301K, however the listing agent wants $350K. I just cant do it. 

@Account Closed Bob youre right, I can only use the cap rate for my offer price, however, with the equation to get a cap rate, wouldnt it inherently affect profitability? 

To answer your cap rate question, I have just done research on other commercial properties in the market and kind of taken an average. I know this is a rough estimate but how else would a more accurate cap rate come about? I can find my own using the other part of the cap rate equation but I try to go off what the listing agent says it is so I could use that in negotiation on price. In the bigger picture, you are absolutely correct, the pro forma cap rate is no where near what the actual is if the property were purchased at asking price. 

@Steve Karp I like the back up to the numbers comment. If I cant make the numbers work, why would I want to budge on the property. The property does have some deferred maintenance, I can tell by talking to the water company that services the property,  and the rents are pretty market average, so I think it just comes down to the listing agent just over valuing the property. The property is not in So Cal. I agree, if I really wanted to pursue the property I would dig to why the seller wants out, however, too many things have lined up for me not to dig on it. 

Oops! I was factoring the NOI on monthly basis. So 2194*12/0.875. So total NOI for the year.

@Account Closed so you are saying go off the sales comps of fourplexes surrounding the property. This doesnt fit my logic because I am not banking on appreciation, only the cash on cash return, which I guess is more suitable for larger complexes. So in other words, I dont think I can justify purchasing the property with the cash flow in mind. 

Here are the numbers: NOI= $2194 CR= 8.75%. Offer= $301K.

That cap rate is pretty comparable to those in the market i'm looking. This brings up a weird circumstance because the cap rate the agent listed with the property does not line up with the asking price, even with the pro forma income/expense they sent me. 

From the realtor listing it. I trusted it due to the other cap rates in the same neighborhood being similar if not higher. Whats your take on that Bob? 

Thank you Austin, that's what I was thinking was the next move. I hope someone doesn't move on the property and get a sucker deal, but the seller doesn't seem to want to budge. Listen to how weird this is- they want all cash, will not accept an appraised value, have had maintenance issues on the property in the past two years (I talked to the water company in the market), and just had two liens released from the local trash service this month. Sounds pretty fishy if you ask me, however, my numbers even work with all that in mind but the offer price is $50K below what they want. 

Hi everyone, 

Just a quick question- I am using a commercial analysis for a property that is a fourplex, however my numbers do not come anywhere near what the asking price is or what the seller is willing to settle for. The next door property appraised near the asking of the fourplex, however if this is solely an investment property is there any reason I should not use the formula CAPRATE*NOI to find my offer price?

I know anything less than 5 units is considered to be appraised using COMPS, but this doesn't make sense to me if I am going to use the property in a commercial sense. 

Anyone want to share their thoughts on appraised value, and how I am choosing to find my offer price?

Hi everyone, 

So along the same lines as the thread.. I ran across this property on Auction.com that I want to offer on prior to the auction and it is held by Wells Fargo. It is the second time I have seen this property on Auction.com in the last two weeks. SO... Auction.com/the seller, falsely inflated the price to see if any buyers would bite. The house in pretty bad shape. With my extremely limited experience, unless something is messed up with the foundation, the house has a full gut of about 25-30K. Does this sound right for a 1100SQFT place? The price is so low at the beginning bid, and the house has been listed at auction twice that I want to see if Wells Fargo will give it to me pre auction since it is the second time around. Any knowledge of something like this? I know up above they say banks wont negotiate pre auction.