I put an offer on a Triplex....it wasn't even shown to the seller

**UPDATE: The property finally sold and closed. Want to see how it went?

1st - It went into Contingent at $1.8 million

2nd - It fell out after about 2-4 weeks and went back on the market.

3rd - It went back into Contingent and about 40 days later it closed at $1.740 million.

What’s that mean? Asking price was $2 million. It was on the market for nearly six months and sold for 15% under asking price. In person they told me they had an offer for $1.75 and I told my realtor they should be taking that offer and calling it a day! I offered $1.6 million and wasn’t going anywhere with my offer. My realtor said I should offer $1.75 and I was on the big NOPE train. As we can see, $1.75 would have likely purchased the property, but there’s also a better chance my offer would only have been used to force a bidding war, which I’m not playing any of that game. Exhaustion from Bay Area housing market and my risk aversion is why I walk away from deals very quickly after making my first and final offer.

That’s the update. Someone got a slick triplex that’s in need of some TLC in Venice for a reasonable price. Good luck to them and I’ll be watching this properties rehab over time. There were a lot of questionable issues with this property, one of which was water than sits on teh ground and never drains. I was somewhat worried this is due to being on the beach, ground saturation, and not having good drainage. That’s a neighborhood wide issue and not something that can be solved with a quick flipper, so I’m questioning the long term value here.

Yea, I’m that guy that sends the real offer among all the bullshit cash offer noise. My offer must be the offer that agents hate, but get to tell others “We have a strong offer on the table” to encourage more offers to come in stronger.

So what was my offer? I offered $1.6 Million for a Triplex in Venice Beach, CA and the numbers don’t make any sense. Let me break down the investment for you.

Property expenses:

Mortgage of $1,051,0 = $5,960 monthly and $71,520 yearly (At jumbo loan max no matter closing price, if someone doesn't purchase flat out with cash)

Property Tax = $18,080 (On purchase of $1.6)

Insurance =  $3934 year ( .055 of monthly mortgage as estimate)

Vacancy = $5,390 yearly (5% year rents Standard accepted vacancy rate)

Maintenance = $16,000 (1% standard accepted maintenance yearly) 

Total Annual Cost = $114,924

Gross Income Rents: $8985 monthly $107,820 yearly

Current EXPERIENCED Rents

Front unit 1bd 1bath = $2895

Middle unit 1bd 1bath = $2495

Loft 1bd 1.5 bath = $3595

Yearly Net Operating Income: -$7,104 (YES THAT’S A NEGATIVE)

Cap Rate: -0.0044 ($-7,104/1,600,000) At purchase price of $1.6

Wtf is going on in the world in which a negative cap rate sale price is an offer that agents don’t even send to the seller? Yes, I’m putting a healthy amount of money down too, so only an extremely cash rich person can make the cap rate workable, in which case you would hate to see the sad cash-on-cash yield for this triplex

I wonder if now home prices will truly level quickly, because refinance rates are up and the guarantee of getting a reasonable refinance is low. Since fewer people are refinancing now, there’s no quick cash deal to pivot back to a refi. There’s less free money in portfolios floating around. Now it’s time for the real owner occupied buyers to come out of the wood work and see what this housing market is really made of.