Out-to-Lunch
Thinks s/he gets paid by the post
I know we have a lot seasoned real estate investors aboard, and I would love your input. I am not looking to invest in real estate myself for profit; rather, I am in competition with RE investors for a property to live in, and I am trying to figure out how much they will be willing to offer.
I am looking in a nice neighborhood (which is where I currently live). Respectable, upper-middle-class families, good school district, etc., which I think that means that an investor will tolerate a lower cap rate. (Correct?)
The property I am looking at is a duplex, and I would estimate the rents to be about $5300 ($2800 + $2500). The taxes are about $14k (and probably will go up to $15k after the sale). The asking price is $750k, but I expect it to go for closer to $800k. It is an older (1927) property (as they mostly are here); it is solid, but lots of wear and tear on properties this age. You could easily put tens of thousands of dollars into it, or, instead, just ignore any deferred maintenance for the time being.
Not taking maintenance, insurance, or vacancies into account, this would imply a NOI of ~$49k (just taking rents - taxes). I am not sure what to include for maintenance in a more refined calculation. (2% per annum? $1/sqft/annum?)
And perhaps most importantly, what cap rate will my competitors be looking for?
Thanks for any thoughts on my not-very-well-posed question.
I am looking in a nice neighborhood (which is where I currently live). Respectable, upper-middle-class families, good school district, etc., which I think that means that an investor will tolerate a lower cap rate. (Correct?)
The property I am looking at is a duplex, and I would estimate the rents to be about $5300 ($2800 + $2500). The taxes are about $14k (and probably will go up to $15k after the sale). The asking price is $750k, but I expect it to go for closer to $800k. It is an older (1927) property (as they mostly are here); it is solid, but lots of wear and tear on properties this age. You could easily put tens of thousands of dollars into it, or, instead, just ignore any deferred maintenance for the time being.
Not taking maintenance, insurance, or vacancies into account, this would imply a NOI of ~$49k (just taking rents - taxes). I am not sure what to include for maintenance in a more refined calculation. (2% per annum? $1/sqft/annum?)
And perhaps most importantly, what cap rate will my competitors be looking for?
Thanks for any thoughts on my not-very-well-posed question.