What Should I Offer?
Ok, the deal is that I am looking to start in real estate with a condo that is priced at 64500 and appraisal is about 57800. The condo has all new carpet, paint, and vinyl. Rent is about 600-650 a month and I figure I can put between 5-10 percent down. How much should I offer? Usually I hear about 75-80 percent of asking price? Is that a good way to start my offer?
65% of FMV (comps) - repairs = Maximum Offer Allowed (MAO)
Anything more move on to the next deal!
[addsig]
What is the difference between the FMV and the appraisal? Bc the condos around it are appraised for the about the same amount. Isnt 65 percent too low anyway, I mean who would take that deal?
When somebody yells HOA, I usually stop dead in my tracks and look around before moving in any direction.
In this case HOA stands for Home Owners Association.
It is the main reason why many investors thread very carefully when it comes to condos.
Get a copy of their Statutes, and minutes of their meetings of let's say the last 3 years.
Ask a lot of questions as to the state of maintenance of the building.
Are you allowed to rent to the candidates of your choice?
Talk to some of the other longterm tenants of the building.
And if you still like the investment, make your offer.
If you do some due diligence in the public records, you can uncover how long the seller has owned the condo; how much he owes on it; if there's any other liens attached etc.
You can then adjust your offer accordingly.
Hope this helps.
[addsig]
My offer is this.. Nothing. (Godfather 2 line )
From the start the condo is overpriced even to a retail buyer, never mind an investor.
Your too far apart on price walking in.
Now, if the numbers were flipped and it was appraised for 8k more than they are asking for, your in a much better position to lowball them, simply because of their price you can tell they are motivated. These people are not motivated to sell cheap, any offer at 65-75% FMV will be viewed as insulting and will just shut down all negotiations.. (Which aint no big deal, since there is no deal here anyway)
There are exceptions to the rule, but just from the numbers I can see your not going to pick this one up cheap. Move on. Not to mention HOA as stated. You'll do far better in the long run sticking to SFR.
Quote:
On 2004-01-17 13:03, gusrock1414 wrote:
Ok, the deal is that I am looking to start in real estate with a condo that is priced at 64500 and appraisal is about 57800.
Sounds like an owner that loves his property a little too much.
The condo has all new carpet, paint, and vinyl. Rent is about 600-650 a month and I figure I can put between 5-10 percent down. How much should I offer? Usually I hear about 75-80 percent of asking price? Is that a good way to start my offer?
It is usually 75-80 percent (not absolute but a rule of thumb [I hate rules of thumb]) of Appraised value (if the appraisal is based on comparable sales)
But before all that.... what are your goals? Long term hold? It makes no difference if you pay asking price if you are happy with the positive cashflow it generates on a monthly basis. I wouldn't, because it galls me to pay retail for anything except food and tips. I base my buying decision on a 0 down basis in which I receive positve cashflow at a maximum 15 year term. That fits my 37 year old profile who is only putting the money back into the business. I have enough cashflow form other interests to allow me to live comfotably. You need to decide what a property is going to do for you before you buy it.
If you have any questions, feel free to PM me. Keep in mind that if your questions are good enough they may be posted on the main board for member review and dissection.
Good Luck,
Shawn(OH)
PS Wheeler Dealer: The advise you gave is good for a rehab. project but not always applicable in every situation. Just like a high mileage hooptie
As I said.... I hate rules of thumb
I agree with wheelerdealer if you are going to flip it and loan-wizard if a prop-
erty in a high-appreciating market. Rem-
ember the prices you pay today are the
wholesale prices of tommorrow. So if it
is a long-term investment, go ahead and
pay 75-80%. I have some friends who
5 years ago bought 10 oceanfront houses for 750k. I laughed at them for
paying market value. Guess what, now
those houses are worth over 2 million
a piece!
Jeffrey Adam
[addsig]
You are correct loanwizard.
However, I was not stating a rule of thumb. Just a guide. If you dont have a base to start from (especially being a newbie) it could be financial disaster. (unless you want to move in and call it home sweet home!)
I beleive you have to make some rules for yourself otherwise emotion might cause a mistake.
my advice is based on experience not guesswork.
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B.G. & Wheeler D. LLc Inc.
(A division of: Half Vast Enterprises)
"Most american millionairs today (about 80%) are first generation rich"[ Edited by WheelerDealer on Date 01/18/2004 ]