This home/commercial property was first listed on the market back in June, it was listed then for $419,000. The seller lowered the price to $399,000 in July and it went pending in September. But the escrow never closed and the home was taken off the market. Suddenly it come back on the market at $299,900 about a week ago, and it went pending shortly after that.
There are not that many comparable sales. What will determine the value of this property is the income potential. The downstairs and upstairs can be rented separately. I think both top and bottom will rent for between $1200 and $1300, so the income potential is about $2500 per month. I don’t think the garage can be rented separately without making some improvements, and possibly getting a change in the use permit for the property. At $2500 per month, that’s $30,000 per year. At a $300,000 purchase price that gives a CAP rate of 10. That’s a very good CAP rate, and no surprise this property went pending right away.
The question is, how much money will it take to get it fixed up enough to get it rented? If that cost $100,000 then the CAP rate starts to look at less favorable. If the building cost $100,000 to make it rentable, then the CAP rate drops to 7.5. That’s still a decent return on investment.