REO property
Asking price: $450,000.00
Four Units (rent is $750 per unit/per month)
Units are in fantastic shape, nearly brand new.
Taxes are $10,000.00
If I use standard evaluation formulas (2% rule) or 50 x monthly gross I get a number that’s about one-third the asking price. Is the bank insane? Should I just offer $150,000ish and walk away? Seems like everything is so high priced in my rural midwestern town of 40,000 that’s 2.5 hours from anything.
Hi,
I would not even bother to make an offer as your price and there pride are far apart!!!
A duplex, triplex and fourplex are classified as “Residential 1 to 4 Unit’s” so factoring and evaluation analysis of income, expenses, cap rates, gross rent multiplyers or the 2% rule are subjective!
In this case when you take $36k in income, adjust it for a vacancy factor 7.5% adjusts income to $33,300 then subtract $10k in taxes before calculating all other expenses before you determine what’s available for debt service makes this thing a no win deal from the get go!
Run Borvo, Run Fast, Run Quick and just Run!!!
GR
Gold River is right…this is a loser.
Don’t use the 2% as an absolute…some circumstances allow for a smaller margin and still leave room to make some money. It’s more of a quick, stubby pencil screening tool.
Keith