Historic Duplex

[Luke G.]

Looking at a off market 100 year old duplex in a gentrifying area of Nashville that the owner approached me about. 3 bdrms a side rent for 550 a room for a total of ~3200/mnth. Obviously this place has a lot of curb appeal, which would help it rent easier.

1.) Trying to access what kind of additional cap ex I should expect with a property that old. Maybe 20% capex?

2.) Really hard to find comps, what's the best way to come up with a value. In the absence of available comps is there any rule of thumb for adding value when comparing a historic home to a newer home. Like add 10% to the value of the comp?

[Tom Shepard]

Hi @Luke G.

Listen to @JT Spangler, @Devan Mcclish and others...

...and run away!  At 2750 mortgage, plus taxes and insurance you are going to have about nothing left for expense, vacancy and capital expenditures.  Don't put blinders on, and don't let emotion rule, this is not a good deal unless you can get it for below $325k most likely.  40-50% (of rents) is a good rule of thumb for expense, vacancy, cap ex, tax, insurance, etc.  Basically all costs except the mortgage.  THEN subtract out the mortgage and see what if any you have left.  We all want to fool ourselves at times and push the numbers one way or another to make it work, especially on what sounds like a cool property with a lot of rent coming in.  Sometimes it looks like its working out for a while and then WHAM.  New HVAC...or roof, or...etc.  If you know or can determine the age of the roof and HVAC those are big costs that you may be able to factor in or out depending on the age.

One last thought, sometimes in historic duplexes they are not independently metered for electric, water, gas...will you be paying any of those?  How about trash pick up?  Lawn care?  Don't forget to factor them into your calculation if you are!