March 23, 2026 | 2 Minute Read
I will be honest. It’s a tough time to acquire rentals as a buy and hold investor. Many sellers—including investors and their agents—are insisting on selling at or near appraised value, regardless of whether the property needs significant capital improvements. Trying to explain realistic investor pricing in this environment has been frustrating.
A common misconception is how sellers think about “cash buyers.” Many assume that if a buyer is paying cash, they will literally show up at closing with cash and therefore don’t need to factor in debt service. Because of that assumption, they price the property based on a projected ROI without considering financing or real operating costs.
Let’s look at a real example.
An agent recently sent me an off-market seven-unit multifamily apartment building.
Property details:
- 7 units total
- Each unit: 2 bed / 2 bath
- Current rents: $4,400 total
- Four units at $700
- Two units at $800
- Estimated Cap Ex improvements: $50,000
- Asking price: $750,000
Now let’s break down the numbers.
Scenario 1: No Mortgage
Even if I paid all cash, the numbers still don’t work.
Estimated annual expenses:
- Taxes: $7,000
- Insurance: $8,000
With current rents, that produces roughly:
- Monthly gross income: $2,933
- Monthly net (after taxes & insurance only): $1,483
And that’s before accounting for maintenance, lawn care, repairs, turnover costs, and property management. Once you include normal operating expenses, the return becomes worse. Even without debt, the asking price simply doesn’t make sense.
Scenario 2: With Financing
Now let’s assume a more realistic scenario where the property is financed.
- Interest rate: 7%
- Estimated PITI payment: $5,241 per month
With current rents, that leaves you with:
- Estimated monthly net: –$841
In other words, the property loses money every month.
The “Future Rent” Argument
The agent did point out that the units are under-rented and could potentially be raised to $950 per month.
But that raises several important questions:
- Will the existing tenants accept up to a 27% rent increase?
- If they leave, what are the vacancy and turnover costs?
- Can the necessary $50,000 in capital improvements be completed without disrupting tenants?
These risks matter, yet they’re rarely reflected in the asking price.
The seller and agent are essentially pricing the property based on future potential rents, not current performance.
If rents were raised to $950 across the board, the gross monthly income would increase to about $6,650. With a 7% mortgage, that would produce an estimated $1,408 per month in net income.
But again, those numbers still assume minimal operating costs.
And if the buyer paid all cash, the projected monthly net would be about $3,733 after taxes and insurance—still excluding monthly operating expenses.
The reality is that many sellers are pricing their properties based on best-case future scenarios, while investors have to buy based on today’s numbers and expenses.
Successful buy-and-hold investing requires disciplined underwriting. If a property only works after large rent increases, major improvements, and perfect execution, then it’s not a deal—it’s speculation.
Until sellers begin pricing properties based on actual performance instead of projected upside, many investors like me will continue sitting on the sidelines waiting for deals that truly make sense.