Existing Renters in a New Purchase

[James Jacobs]

Good morning, everyone!

I do not own any rental properties and am looking to make my first deal. I visited a large duplex (10 bedrooms) property last night that I am interested in. Both sides are rented. One side is month-to-month, the other side is under contract to October. It is located in Michigan.

Pros:

• Good location
• Analysis shows good cash flow and good CoC return and fits my model
• Good building structure
• Finishes are fairly tenant-proof for the most part
• It is listed at a fair price, but definitely not at a discount at all
• Seller is moving out of the area and seems fairly motivated

Cons:

• Both renters have pets
• I am told the one renter works 2 jobs and the other side renter has 3 jobs (doesn't sound too encouraging) for the financials 
• The unit on one side is an absolute mess and there is visible damage from the renter (probably a few thousand dollars worth)
• Since both sides have pets, there will probably be quite a bit of clean-up at moveout time that I'm not sure who would pay for (maybe it's in the lease agreement?)
• With a conventional mortgage and 20% down, it would tie up quite a bit of my cash. I don't want to get too creative with financing on my first deal. If I tie-up a fair amount of my cash, I want to make sure it is setup for success.
• Both sides have finished basements (maybe a risk for leaks?)

I feel like most of the cons are pretty short-term, but it seems like a lot of cons for my first deal. All thoughts and words from the wise will be greatly appreciated!