Saturday, July 09, 2005

Tri-Plex Value

Dear Readers,
I was out showing real estate most of the day... to three different sets of buyers. I started with showing two 20 acre parcels up the Chumstick (10 miles out of Leavenworth), then to show one of my listings in East Wenatchee, then a tri-plex in Wenatchee.

The tri-plex is what I want to post about this evening. The buyer specifically inquired about this property, but looking at the income vs price it didn't seem to "compute" to me. I mentioned to the listing agent that the price seemed high for the income generated and she just said they haven't raised the rents for a long time and the income "should be" higher.

This creates a problem when the owner wants to sell. For appraisal purposes, the "rental history" is based on the "actual" income, and most likely the property will not appraise for the value the owner wants (in the unlikely event they did find a buyer to pay that price).

In addition to the income discrepancy, there was a lot of "deferred maintenance", which would have added significantly to the cost basis of the property.

This one didn't make sense for my out-of-state buyer, so we're looking at more viable options, of which there are many.

The moral of this story is: If you have income property you plan to sell in the realtively near future, get the rents up to market value before you put the building on the market.

Have a great week-end,
Carol

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