Paying Market Value?

As a newbie looking to buy second rental property (single family home).....is there anything wrong with paying market value/seller's asking price if I see a modest cashflow? I was just wondering if I should try harder to get properties at a discount so I could start with equity?

Comments(3)

  • jeff120027th January, 2004

    Buying for cash flow and appreciation are legitimate reasons to invest in a property. Just make sure your numbers are in line with appropriate expenses figured in correctly.

  • telemon7th January, 2004

    Nothing wrong with it, but the question that begs asking is WHY would you want to do it? I guarantee that wherever you are in the country you can find properties that will either give you cash back or instant equity.

    I would never pay retail for an investment property. I would rather spend a smart dollar than just a dollar.
    [addsig]

  • clevincc7th January, 2004

    I bought a rental house (2 unit) at close to market value. The price was not that good but...There was a positive cash flow of about $350 a month after expenses. Money out of pocket was also very little. The financing was very good. First mortgage at 85%LTV at 6% interest with no PMI. A second mortgage with the seller of 10K at 8% (Total LTV of 96%). I put 4% down and had closing costs of less than $2k (local bank). I could have a 95 or 100 % LTV loan at a higher interest rate with closing costs much higher and monthly payments the same or more as my current loan, but a better retail price as I would have more power to haggle over price with a cash deal. I chose close o FMV.

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