First Deal - Not a home run, but I am in the game

[Kolton Urso]

Property
- Duplex
- Units are 2 br / 1.5 bath, ~ 1000 sq/ft
- Attached garage
- One of only a handful of duplexes on a main street that primarily has single family homes.

Numbers
- Asking $189,000
- Offer $205,000
- 20% Down
- Current rents $700 Unit 1 / $800 Unit 2
- Market rents $850-$900
- 2018 Assessment $262,000
- Cash Flow ~$150, COC ROI ~4% (Accounting for Vacancy, Maintenance, Reserves, and adjusting for expected rents)

Situation 
My goal for 2019 was to buy my first rental property . I have spent the better part of the year reading books, reading the blogs, and overall just trying to educate myself about anything and everything real estate related. My target property was something that needed some rehab work that i could put some sweat equity into and create some forced appreciation. I had placed a few offers over the last month, but was outbid on all of them. Then this property popped up.

The property was posted on the MLS with very limited showings times. My Real Estate agent sent me the listing on the first day it was posted and we went and looked at it that night. The property was in very good shape. None of the big ticket items needed to be replaced, and no major remolding would be required so there wasn't much room for any forced appreciation. The thing that stuck out to me on this property was the assessment value vs. the asking price. The cash flow and COC ROI were not what I was looking for, but they did cover everything and the initial equity was pretty nice.

I never got the full story, but the owners were an older couple that needed to sell quickly. The listing agent said they would only be accepting offers till noon of the next day and that they would be selecting an offer that evening. I placed my offer first thing in the morning for $205,000, over asking as there were ~10 other people there for the showing and i just felt that others would be coming in around the $200,000 mark. True to their word, my offer was accepted the next night.

The only major work that needs to be done is to install drain tile in one of the basements. The other units basement already has the drain tile installed and a new sump pump. The siding could be re-painted, but nothing that need to be done day one. Windows, roof, flooring, kitchens, and bathrooms are all good.

As for the tenants, one tenant is extremely clean and his unit is immaculate. unfortunately he is the one pay $700 and is on a month to month lease. He is the one that provides the maintenance to the property for reduced rent, but that will have to change as the property does not need enough maintenance to justify the reduced rent. The other tenant is extremely messy, stuff spilling out of the garage, yard littered with belongs, spare cars parked in the front and back yard. A real eye sore compared to all the other properties on this main street. 

I have a feeling that both units rents are below market value due to this second tenant. My thought is to have that tenant clean up the property, or just next extend the lease next spring. After that I can get the rents back up.

So that is my story for my first property. Even though this property ended up being very different than what i set out to get, I am happy with the outcome.

Let me know what you think. Would you have taken this property with the lower cash flow, but considerably higher assessment?