I get new MLS listings when they're first listed or change. Here's a listing that I got today with a price reduction of 16% on an apartment building that's located in a prime area:

Previous price: $ 2,150,000

Current price: $ 1,795.000

DOM: 59

Last Sale Date: 5/23/22

Last Sale Price: $ 825,000

Gross Rents: --- $ 185,574

Est NOI @ 60%-$ 111,344

Cap rate----------------- 6.20%

Est Annual Mortgage Payment: 120,480

Cash Flow: (9,136)-negative

COC return: (2.55%)-negative

Beyond the negatives, the big problem is no one can finance this as priced. It can't meet the bank's DSCR unless you come up with more money down. No one in their right mind is going to do that because the yield isn't there. Let's say you make your downpayment is 40%, cash flow is only 17K a year or a 2% COC return. Future appreciation? Not happening for awhile. The math has to make sense.

The price cut of 16% is extraordinary given recent history but is not enough to move the buyers off of the sidelines. This place needs to be go for somewhere around $1.2 to $ 1.4 (cap rate of 8% to 9%) to make sense. He's got another $ 300,000 in price cuts to go.

What's interesting here is the fact that he's cutting significantly after only 59 DOM.

Not that it would really make a difference, in this case, but I'm just wondering:

What condition is it in / how well is it managed?

I had a SFH pop up like that on the MLS.

They lowered the price by 35%.

I believe this building is well managed. It is in a prime location. The listing doesn't provide the detailed rents but I suspect he has full boat rent or close to it.

I was looking at another place located in a prime area and a couple of the units were occupied by section 8 which was highly unusual. The only reason someone would do that in a prime area is difficulty renting and being under pressure to cover the mortgage. On this other place, the guy overpaid when he bought it and is negatively cash flowing from what I can see.

In the press, there's a constant drumbeat of how hot the market is for renters but it takes me on average at least 60 days to find a tenant. Some of these guys can not wait that long.

117% appreciation in just over 4 years? He has room for more reductions and still be ok.

I remember when a 10-12% cap rate was pretty standard.

At 2.15 mil he was going for a KO in the first round. Never hurts to try. Now, at 1.8 mil he's just going for a home run. He's probably a Broker so listing it is free. If he settles for 1.65 mil, he's doubled his money in 4 years, not too shabby.

Right now he doesn't have to sell. When he does, the price will be right, the math will work and the buyers will magically materialize.

Perhaps just perhaps the answer is to pay 3 Million interest only on the place with a 10 or 15 balloon

That or perhaps you need to just master lease it

If the only tool in the tool box is a big price hammer and nothing else, no one will buy it. Fact is if your cap rate is that low, I really want to see multiple year commitment from the residents and typically residential properties just don’t provide that needed safety to offset the desired price

"That or perhaps you need to just master lease it"

This appears to work best when there are certain conditions. Namely, the seller having major operational issues and a market where conventional sales are stalled. DOM are increasing here, but expectations are for standard purchase contracts with the only variation being seller financing. And my own preference is for a traditional transaction where I just own the place at the right price. MLO might work with SFH in this area but that's outside of my sandbox.