Wisconsin first time home buyer looking for duplex near Wausau

[Luke C.]

Hello Bigger Pockets! 

I have wanted to be a real estate investor since I was in high school. Two years ago I married wife of my dreams and we activity looking for or first investment property. Just a month ago I was pre-approved for FHA and getting so close, but we don't want to jump into anything and get in over our heads. I looked on all the sites, been on craigslist and trying to network with everyone, but have come up with limited options because rents are going up due to higher demand. I reached out to an agent I talked to a year ago who owns over 40 properties and told me about a couple properties she would consider selling which are not on the market. She has been terrible at communicating and after a couple weeks we were able to take a look at one side.

Here's some of the figures:

3 Bedroom 2 bath 1600 sq ft each side built in 1995

One side is being rented for 850 and just signed a new lease other side is finishing up a 1 year lease for 800 per month and will go to month.

Taxes $4900

Has new roof, original HVAC systems and water heaters.

The duplex needs updating and is rough around the edges. 

Needs painting and some dry wall fixed, I noticed the skylights seem to have paint peeling and little black around the edges, may need to be replaced. Bathrooms need some remodeling and some leaking around toilets. Also the kitchen is ok, but again needs updating maybe some new appliances.

Had a family member come and hes saying maybe 20k worth of stuff, but some I believe can waiting depending on inspection. He advised not moving forward, but he hasn't seen whats on the market at that my price range. 

Its in a lower income neighborhood but its blocks from shopping and schools.

This is the problem its on my high end for price 150k, and the person selling it wants an offer before showing me the other side because she doesn't want to scare her current tenant. She said I could stip as a condition of sale is seeing the other side. Thoughts?

[Mark Strobel]

The new state law passed earlier this year has made it much more landlord friendly in Wausau and all of Wisconsin, so don't let that scare you.  Eric M is right about Wausau taxes though.  Very high, which makes it much more difficult to make decent cash flow numbers.  The duplex you are looking at is a bit higher end than what we look at.  $20k of improvements on top of a $75k purchase price per side will likely not cash flow at $850 rent.  My initial thought would be to offer $85,000 for the property.

There are many nice duplexes in Wausau that you can pick up for $70-100k. I picked a 1900 upper-lower duplex for $70k last year. Each unit has 2 bedrooms and 1 bath. I get $575 and $595. Even with that, the cash flow is not what I would like it to be after I reserve for maintenance, CapEx, and property management. Don't forget to always reserve for these items in your purchase calculations, even if you are going to manage the property yourself.

Contact a few property management companies and ask them if they have any owners who are looking at possibly selling, or maybe who don't have the energy/interest in rentals anymore.

Don't give up.  Keep looking.  Just don't feel like you have to jump at this deal because the rental property sales inventory is low.

Also, if this is such a good deal and money maker, why is the agent owner considering selling?  Ask point-blank questions.  If you do make an offer, make sure that you make it contingent on reviewing the tax returns on the property for the last three years to get an idea of maintenance issues.  If they haven't spent much on maintenance, then there might be more deferred maintenance that you inherit.

Mark