In its current state:Current NOI: $79,058 (based on 80% occupancy).Current Cap Rate (at $1.25M): 6.32%, reflecting the property’s as-is performance.Value at a 7.5% Cap Rate (Market): $1.05M, based on current NOI.Given the renovations, vacancies, and risks tied to stabilizing the property, I’m considering offering $850K to reflect its current state and value-add potential.

As Sean above alluded to- never pay a seller for your future hard work, risk and stress. 

As mentioned, we "openly and notoriously" record the deed for the world to see so there is no hiding things from the bank (which could be construed as fraud not to mention poses many other risks for creditor liens, etc.) 

I have a property listed for sale in Goodyear, AZ and it carries a 2.25% interest rate.

Lenders often have strict policies when a property is in a FEMA-designated disaster area to protect their risk, even if the property isn’t directly impacted.

I am left to wonder, though some investors with SFR's are doing it successfully, is the risk too high for the reward?

Is it worth it to go through the proper process with the city and run the risk of a huge expense to make this a 3rd unit? 

This is in RI so letting the heat out is not just a big cost but a risk.

Diversifying your portfolio can also be beneficial, as it helps mitigate risks associated with market fluctuations.

Assuming you are both working and the rentals are long-term, rental losses up to $25,000 can offset W-2 income if your MAGI is under $150,000, with excess losses carried forward.This post does not create a CPA-Client relationship.