First Deal... Occupied Duplex.. Long Term Rental

[Dax Squillante]

Hi All, 

Close to pulling the trigger. Clean Duplex listed for $250K. Unit A) 3 Bed/2Bath Unit B) 2 Bed/1 Bath.  Both units are rented for $1000/mth. Planning on using a 401k load to fund my downpayment. The 401k load is $433/mth for 60 months and even with that hit this still looks like a winner when I crunch the numbers. Can anyone take a look and let me know what you think? Thanks so much. 

[Mike Wood]

@Dax Squillante  Non-debt related is everything else, which would include to name a few, insurance, taxes, management, lawncare, shared utilities, repairs, maintenance, vacancy, etc.  As a general rule, most investors use ~50% for quick numbers.  I personally have six (6) duplexes, and self manage and my expenses range between 25%-35% (with 25% being on new build properties for the first few years).  If I had them managed, that would easily add 10-15% to the expenses.

I think if you actually itemize all of your costs, you will quickly find that a $250k duplex with rents only $2k a month to be a marginal deal, and a bad deal when you try and finance 100% of the deal.  I would not personally look at that deal past the price and rents.  I am a firm believer in the 1% rule (gross monthly rents should equal 1% of the total price of the property) as the floor for any deal.  All of my properties are over the 1% rule, and there are some on BP that want it to be 2% (which I find impossible in my local market).