How much for $1755/mth gross?

Question

Question:  How much would/should someone pay for a duplex with new roof, 2 new gas boilers, new kitchen appliances and property grosses $1755.00 per month ? And off street parking.  Located southern NJ.

Aaron Mazzrillo · Answer

My answers are always the same whenever anyone asks me the same 2 questions;

Q: How much should I get as a wholesale fee.

A: As much as you can.

Q: How much should I pay for this property?

A: As little as possible.

I think a better wording of your question would be "What is the maximum amount I should pay for this duplex?"

Therein also lies another problem - we the audience only know you have a duplex with a new roof, 2 new gas boilers, new kitchen appliances and property grosses $1755.00 per month, plus it has off street parking and is located somewhere in southern NJ.

That is good info, but really leaves out lots of other pertinent information. Are you paying cash? Getting a loan? If so, how much are you putting down, what is the interest rate, is it a 30 year fixed? Are you getting seller financing?

What is market rent? Are the rents now below or above market? What is the condition of the rest of the building? What are the bed/bath matrix? Do the units have their own yards? Hot water heaters? Separate electric and gas meters? How long have the tenants been there? What utilities does the landlord pay if any? What is the neighborhood like? Is it full of other apartments or single family houses? Is it a 'tough' area or tree lined streets and you'd have no problem sending your wife there at 8pm on a Friday night to show it to a tenant?

I can keep going, but I think you get the point. Just based on it being a duplex and collecting $1,755 gross rents, not that long ago I bought one with similar rent for $140K and it was in pretty much excellent condition. Similar properties in my market are now selling to retail buyers for around $225K.

I'm not a buyer at $225K and not quite yet a seller. Maybe at $275K I could be coerced.

Doug Scarano · Answer

@Ned Carey  full disclosure: we own this unit.  Original purchase was $85k. We lived in half, rented half, saved$, took out equity and bought a rancher 3 BR. Fully rented duplex now for 5 years. Owe $100k. PITI & W/S/T is $1150 per month.  After tax and misc. we make $200 per door. New electric. Separate meters. Separate gas. Common water. Rent could be raised a little but I'd rather get a little less than have someone move out.

@Bob Bowling  not sure what GRM is but I will look it up.

@Aaron Mazzrillo  you're right, here's the question I should have asked:

What is the maximum price that someone would pay for a duplex that grosses $1755.00 per month? Two 2BR 2BA units. .75 acre common yard. At what point is it a financially unsound decision?  Or can it be offset by more cash down? FMV of duplex is $165k.

Account Closed · Answer

$1775 X 12 X  the GRM for similar properties in the area.

Doug Scarano · Answer

@Charlie Hampton  I am right down the road in Bridgeton. Thought about Salem. Places are on sale but I just don't want to deal with the clientele there.  Would rather go towards cherry hill or deptford maybe near the school in glassboro. But for now concentrating in/near bridgeton. Have my sights on another fully rented duplex grossing $1700/month but roof is not new or the heaters. Tenants are good pay though.

Charlie Hampton · Answer

What part of south jersey is the duplex located?  I have one in Salem that I paid $20k for (needed rehab, 3 bed 1 bath units). I am in it about $75k with two new heaters, new electric one side, new plumbing on both and a new roof. Obviously Salem isn't the best area but South Jersey has a wide range of neighborhoods (ie: Cherry Hill vs Camden).

Doug Scarano · Answer

@Bill Jacobsen  Thank you for you analysis and input.  Even though I am now renting my second property, SFR, I am still learning how to determine a good deal from a bad.  I like having the rents coming in and 90% of the house is upgraded, I also like the idea of flipping. My main goal is to create a steady enough income from rentals to expand into flipping and eventually have enough coming in to make a house with a dock my permanent residence and retire!

Dream big and make big things happen.

Bill Jacobsen · Answer

According to my buy and flip formula it is worth $121,000.  Based on the gross rent at a 50% expense ratio it is worth about $132,000 at an 8 Cap.

Would need a lot more information to give a better answer.

Good Luck.

Bill

Ned Carey · Answer

Not enough information to answer. Are you buying for  cash flow or appreciation? Is the neighborhood on the upswing or an at risk neighborhood. Are you able to get financing or will you have to pay all cash. What are your goals? What is your risk tolerance?  How old is the electric and plumbing?

In general most investors wouldn't touch it for over $175K (The 1% rule) I my market I would expect to pay $55-65K

You should run actual numbers and see what your expected return is and then decide if that meets your criteria. If you don't have goo numbers for expenses to work with, assume 50% expenses not including financing costs.

Doug Scarano · Answer

taxes are $4100/yr

How much for $1755/mth gross?

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