Triplex Deal In Progress
Subject Property:
Asking price: $110,000
Condition: Fair (needs some work)
Days on market: 242
Age: 31+
Tenants are month to month
Gross Income:
Efficency $300
1 Bedroom $325
2 Bedroom $375
Vac. Allow. -$600
Effective Gross Income $11,400
Expenses:
Taxes $463
Water/Sewer $1188
Maitenance (5%) $1800
Elec. (Tenants pay)
Toal Expenses $2863
NOI $8,537
My Letter of Intent: (through broker)
Lease option paying $500/mo., with $300/mo. counting as credit purchase price of $70,000.
In addition, offered % of rent increases above current annual gross income.
Owner countered:
Agree to a terms, except the first year the purchase price is $80,000. Second year $90,000. Third year $100,000.
I'm thinking, based on my NOI of $8,537 and a Cap rate of 10%. The property is worth at most $85,370.
If I purchase in the first year, with the rent credits, I'll buy it at $76,400.
I'll fix it up, raise the rents, and we are in business.
[addsig]
Well you don't actually ask any questions so I'm oging to assume you just kinda want a general review.
I'd try to tinker with the purchase prices iin the out years. Assuming the $80,000 represents current market value then the price in the option is escallating at 12.5% in the first year. Your rent credit toward purchase is about 4% per year. In other words the price of the real estate has to go up 8% per year for you to break even. Is that typical appreciation in your area?