Making an offer on a SFR

[quadzilla]

Thanks DC. Based on what you are saying shouldn't this place be worth closer to $250 - 300K if you were looking for 7.5% cap rate?

I have been tracking SFR's in an area of Northwest Chicago since June. A realtor sends listings for SFR's between $450 - 700K. When I started in June there were 48 listings. As of today there are 39 (Many have been pulled for the winter I assume). Only 6 houses have closed since I started tracking them and 4 were for less than $500K. The asking prices are dropping on some but, most have stayed at the same price.

I saw DC's post about rental analysis and I decided to check to see what these places are asking for as rentals and I was pretty shocked to see how low the rents were in comparison. Here is an example;
For sale
For Rent

If I put 20% down $117,800 and had a 6% rate my PI would be $2825 (Doubt I would get 6% on a Jumbo right now though). Taxes on the place are $4000 but, will be getting reassesed in 2008. So lets say $3300 with 20% down. They only way this could make sense was if you felt that would see some decent appreciation. Based on what I said at the begining of this post I can't see how there will be any increases any time soon.

The guy bought the place for $347,500 on April of 2006 and he did rehab the place.

When I read spex post about making 50% offers at first I thought it wouldn't work but, there has to be someone in that group of sellers that is willing to take 50-70% of list price. I have been shown a lot of these places and I could surely single out 5-10 of them that I would be willing to live in. Unless the climate has changed I will be doing what spex talked about in the other post and will post a trip report if anyone is interested. If I don't get anywhere I'll just rent and invest my money elsewhere. Can anyone see a reason not to?