Does this sound like a good one for a rehabber/landlord?
Duplex, units rented for combined $1900 this past year. Tenants pay heat and electric. Landlord pays sewer and water.
ARV: $190,000
Work needed: $25,000
My asking price: $125,000 (includes $10k wholesale fee)
without knowing the financing details it’s hard to say but if you’re paying cash MAO (Maximum Allowable Offer) is ARV x 70% - repairs.
so that’s $190K x 70% - $25K = $108K if my math is correct
so if you’re paying all cash, $125 is too much. try to negotiate the price down a bit more.
if you’re getting owner financing, then MAO does not apply.
I wouldn’t pay more than $95,000 for it as a rental. Obviously, you’d have to buy it cheaper if you were going to sell it for $95,000.
Mike
Thanks guys, that helps me out with making my offer. I would have thought about $110, but it’s great to hear what those with experience would pay.
Thanks!
Hey Property Manager, is there any formula you use to get the top price of $95,000? Is it based strictly on gross rents and cashflow?
morningnewsman,
I divide the monthly gross rents by .02 as a screening tool to determine maximum purchase price. Then, I do a cash flow analysis with real world expense numbers to make sure I’ll have $100 per unit per month positive cash flow. Finally, I must have at least 30% equity at closing.
Mike