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those zillow estimates are meaningless, especially since the owner of the home can add "updates", and comps from 6 months ago, etc., to bump up the "value".
the best "estimates" are still the comps, but if it's a nice house and/or a nice area, you have to ask yourself what it's worth to you
Time for a math lesson: your "Gross Rent Multiplier" formula is the same thing I described.
You state it as 150 to 200 times monthly rent.
I stated it as 12 times monthly rent (to get annual rent) times 15. Now here's the gee whiz part ... 12x15 = 180. So my formula is just another way to get 180 times monthly rent, right smack in the middle of your range.
It's pretty funny that you criticize my analysis and then in the same breath extol the virtues of one of the tests I explained in my post.
It's just a coincidence that your formula gives a factor that falls within the GRM range.
Your formula gives a solid 180 multiplier -- a fair estimate of value, but it does have some limitations.
Your calculation doesn't include a property's operating expenses and vacancy factor. We could have a situation where two properties have approximately the same potential rental income, but one property has significantly higher operating expenses. The above formula would result in a questionable estimation of the market value for these properties.
I agree that the above GRM formula uses the monthly potential rental income and doesn't account for a vacancy factor, which could have an impact on the accuracy of the property value estimates. The seasoned investor understands the above limitations and uses the GRM range to get a quick feel for the potential market value.
Last edited by JG183; 02-17-2009 at 02:11 PM..
Reason: grammar
I said they probably won't lose money if they stay in the house at least 7 years
Oh yeah? and why so? what is so special about 7 years? If the fair valuation of this house is 100K less then they lost this money forever in 15 or 1000 years.
Perhaps you believe that there will be another bubble in 7 years. I am sorry to disappoint you but no. The times when trolls can make money on a house are long gone.
Yeah, must be why some realtors selling homes try to hide the z-estimates from people. Anything that affects your home value, whether "accurate" or not, is not meaningless.
seriously though, I admit that the one thing which is difficult to separate from the hard math is the notion that your house is not meant to be your 401K.
a house is first a place to live, an investment second
seriously though, I admit that the one thing which is difficult to separate from the hard math is the notion that your house is not meant to be your 401K.
a house is first a place to live, an investment second
Thanks everyone for the tips is really appreciated! Today, we've been negotiating the owner counteroffer our initial offer of 390K and asked for 415K (keep in mind his listing price is 439,900) and I get to keep the appliances, barbecue grill, and patio set. I still feel this is way overpriced.
I told my realtor, those must be some expensive appliances...lol and that it doesn't matter I have my own things already and besides he already relocated to montana supposedly? so Either way, those things would stay as it would be more trouble for him to move it back there.
My realtor suggested I offered 405K and then maybe they will take my offer and call it a deal.
I told my mortgage person and we did some calculations she said that from 400K to 405K there is not much difference with a 30 yrs mortagage it would be like $26 more.
we are pondering if we should draw the line at 405 as long as they pay 2009 taxes, otherwise 400K? What do you think?
Initially, in the listing of this house it was mentioned that owner was willing to pay 2009 taxes as long as house is sold before 1/31/09 after I questioned the seller's agent if that was true or not? the very next day she removed the comment from the listing, weird eh?
Thanks everyone for the tips is really appreciated! Today, we've been negotiating the owner counteroffer our initial offer of 390K and asked for 415K (keep in mind his listing price is 439,900) and I get to keep the appliances, barbecue grill, and patio set. I still feel this is way overpriced.
I told my realtor, those must be some expensive appliances...lol and that it doesn't matter I have my own things already and besides he already relocated to montana supposedly? so Either way, those things would stay as it would be more trouble for him to move it back there.
My realtor suggested I offered 405K and then maybe they will take my offer and call it a deal.
I told my mortgage person and we did some calculations she said that from 400K to 405K there is not much difference with a 30 yrs mortagage it would be like $26 more.
we are pondering if we should draw the line at 405 as long as they pay 2009 taxes, otherwise 400K? What do you think?
Initially, in the listing of this house it was mentioned that owner was willing to pay 2009 taxes as long as house is sold before 1/31/09 after I questioned the seller's agent if that was true or not? the very next day she removed the comment from the listing, weird eh?
is that even legal? at closing, the taxes/escrows are on the HUD1, unless the seller gives you a concession of whatever the taxes are, I don't think they can actually "pay" them for the year.
Ignore the appliances completely - take them out of the picture. It will cost the seller more to have them taken out anyway (and frankly, apart from a BBQ grill, I expect any house I buy will have "appliances" like fridge, washer/dryer, stove, dishwasher already included ... I don't consider it an "extra" to be used in negotiations). This is a non-issue and should be ignored from your perspective.
I'm going to give you some frank advice: I think you're too attached to this house to be considering going over the amount you decided you were comfortable with, in the calm, rational calculations you did beforehand. DO NOT GO OVER YOUR PRE-DETERMINED LIMIT. It's a pre-determined limit for a reason ... precisely because in the thick of negotiations, thoughts like "well, $5,000 is only $26 per month for the next 30 years ...." You were wise to set that limit ahead of time, stick with your planned limit.
Why go over your limit to buy a house that will likely continue to sink in value for years to come? Will you have 6 to 12 months of living expenses saved up in an emergency fund after you pay for the down payment and closing costs?
Someone once told me "Never fall in love with something that cannot love you back," and a house is a perfect example of that. They are fungible, a dime a dozen, and there are plenty of fish in the sea. Stick to your original plan.
I suspect the seller will accept your 390K offer; walk away and let him squirm. It will be the easiest $15,000 you will ever save.
(Of course, my real thoughts on this are that even your 390K offer is greatly overpriced, but it seems that you're about to jump anyway, so at least try to minimize the financial damage of this decision and don't go above your offer ... )
Good luck! And if this one doesn't work out, don't sweat it -- there are many others out there that will be just as good, or better, than this one.
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I am sorry to disappoint you but no. The times when trolls can make money on a house are long gone.
