First Income Property Deal - Thoughts!?

[Calvin Kwan]

Hi Everyone!

I'm looking at my first deal in the Northern CA area and wanted to get your feedback.  As you guys may know, the Bay Area housing market is hot, and deals using 1 or 2 percent rule have been extremely tough to find.  I used the rental analysis tool and here are my results...

Purchase Price:  $625K/ Duplex

Monthly Income:  $4,800.00

Monthly Expenses:  $3,637.07

Monthly Cashflow:  $1,162.93

Pro Forma Cap Rate:  5.89%

NOI:  $41,542.00

Total Cash Needed:  $184,875.00

Cash on Cash ROI:  7.55%

Purchase Cap Rate:  6.39%

Vacancy: $240

Repairs: $240

CapEx: $480

Insurance:  $100

P&I:  $2298

Property Tax:  $278

The numbers look pretty decent and the area is up and coming.  Comp rental units are going for 2400-2600 in the area.  The challenge is that the property is a probate sale (no court confirmation needed).  The current tenants are relatives of deceased and have been difficult to work with.  The listing agent isn't allowing an inspection unless an offer is submitted.  From the outside, the place looks like it'll need some cosmetic repairs, but who knows until we look inside.

So my agent is suggesting I submit an offer at full price with several conditions - 1) offer is subject to inspection and 2) tenants must vacate at the close of escrow.  Submitting at full asking price will get us into the property for inspection, ahead of those with lower offers.  She is assuring me that there is no risk, since the offer contains the inspection condition. The second condition allows me to rent the units at market price once I take ownership.  Does this all sound correct and possible?

Would love everyone's thoughts!  I really want to get into this area and these are the best returns I've found so far.

Thanks,

Calvin