Sorry my typing is way too slow, not to mention Chinese input.
A wholesaler has a condo for sale to his clients. 1380 sf, 3 bed/1.5 ba. Market value ~$100k on Zillow, rental value $900/month. He asks for $66k and said he will list it on MLS for $80K if none of his clients takes it. He updated it with granite counter top.
I drove around the condo and talked to people I met there. Looks like a good area for retal therefore I am not warried about the rental income. Most people living there seem to be working class. I didn't go inside since I don't have an appointment set up yet.
After calculation, the NOI = $6340. If desired cap rate is 12%, then the house is worth $6340/12% = $53K. If desired cap rate is 15%, then it's worth $42K. Both are significantly lower than $66k.
The condo market value is flat in the past 10 yrs. Therefore I don't see much potential for appreciation. Therefore I mainly invest for cash flow.
I am going to negotiate the price using this NOI statement.
The question is, is it correct to calculate the house value using the above NOI/Cap rate method? Are there other ways to estimate the value? I can't seem to think of a better way for something that's invested only for cash flow.
Another question: can I apply for a home equity loan on an investment property such as this one? I am thinking of cashing out my payment after the purchase, since the market value is way higher.
Thanks for helping!
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