Analyzing My First Investment Property

[Kyle Fedewa]

I am currently looking at purchasing my first investment property in the greater Lansing, MI area. My realtor sent me a property that has not yet been listed, 3 duplexes all next to each other, asking price is $229,000, each unit is a 2/1 and currently rents for $585 with landlord paying water and sewer($50/mo per unit). Subtracting all the numbers he gave me, I’m showing it clears $2,358.15/mo before any debt service or cap ex. Also, these were built in the 70s and all in seemingly good shape. Will need roof in a couple years, but overall good shape. Obviously there are a million variables, but on numbers alone, what are your thoughts on this? The only thing that is holding me up, is the cap ex. It is out in the country, so the rent is low and correspondingly the price is low, but all the cap ex costs will be the same. Any advice or input would be greatly appreciated. Thank you!

[Anthony Dooley]

@Kyle Fedewa the numbers look great based on what you stated. Do not worry about cap ex. This is the most overstated thing on this forum. Cap Ex is not an expense. This is just one way to save for repairs. The money is still yours. Another way to do it is to run this like a business. It is a business. All of your rent money should go into it's own checking account each month. From this account, you pay the mortgage and expenses. You do not use the income from the rentals for anything except for the rentals. Over time, you will have a lot of money in this account to cover incidental repairs. When your roof needs replaced, you just write a check.