Is this a good deal? Just starting out.

[Robert Arquilla]

Ok so first off let me introduce myself, my name is Rob I'm 25 and currently going to college. I have been reading a lot about real estate investing the past 6 months or so and have been looking at houses online just to entertain myself.  So I found a duplex in ohio less than a mile away from a country club listed for $65000 with 2 beds and a bath I'm each unit. Rent averages from $450-650. It's currently being rented for 500 per unit with them paying all utilities except water and trash. Hypothetically if I were to purchase this and just do some cosmetic work to make it have a little more curb appeal and charge $550 per unit would this be a deal you guys would pass or go through with? Any thoughts or ideas would be appreciated. Thanks! 

[Timothy Murphy III]

@Robert Arquilla 

Welcome to the site.

Your annual gross rents for that unit at $550/unit/month are $13,200. The 50% rule tells us that, in general, operating expenses are 50% of gross rents. Based on that assumption, your annual income from the property is $6,600. $6,000 annual income on a $65,000 property is ~ 10% return on the investment. Personally, I'd like much stronger returns from a property in the midwest and you can find properties with better returns in the midwest. This is especially true if you can fund and manage a rehab.

Some other factors to take into consideration:

Are favorable financing terms being offered? Will the seller reduce the price?

Is the property truly turnkey with no deferred maintenance and/or renovations required?

Will the market bear higher rents than $550/unit?

What's the neighborhood quality? Is there the potential for price appreciation? a 10% return in some areas / neighborhoods is excellent, in others, it's terrible.

Is a 50% expense ratio accurate? This is a good rule of thumb but some properties may be unusually expensive / inexpensive to maintain, manage, insure, and pay property taxes.

Personally I'm not terribly impressed with it as described but there's a lot of other factors to consider here.

Tim