Duplex with shared pool + how's my math?

Question

From where I sit, this Duplex configuration looks hard to sell to a potential tenant. Shared back patio and miniature in-ground pool? That plus the bad math have me looking at this as a bad investment property.

Homes for Sale near Ocean View Ln, Melbourne, FL | realtor.com®

As listed with the current rents provided, it's not a great investment from what I can tell.

549k w/ 20% down at 4.5% with $522/mo for insurance is $3,341/mo going out.

#1 is $1,675 and #2 is $1,650 or $3,325/mo coming in.

Right off rip that's upside down with no room to save or grow. Am I missing something or is this just a bad deal? I recognize that the MLS is almost always bad investment deals, but I'm practicing analyzing everything I can in my nearby markets.

Thanks!

Account Closed · Answer

I don't deny the assertion that most of the inventory is on the MLS. However in 2021, in desirable markets, the reality is that prices on public listings are not where they need to have the margin needed for a "good deal".

To the extent you can source off market leads, as the I-buyer types are doing, you very likely will come across something with much stronger numbers.

In Brevard, I've seen absolute junk houses advertised on the MLS as "handyman specials" and going for just shy of 200k. I'm not a flipper, but you generally  can't flip at that price.

Joshua Wilson · Answer

@Tchaka Owen That bang for my buck is why we're heading to Palm Bay.  Just bummed I won't be able to watch a launch from my front yard anymore.  At this point I'm just analyzing things like crazy.  I'm more focused on making sure my math and estimates are looking good right now.

We're debating selling/renting our current 4/2 1800 sq/ft house in Port St. John in a few months.  With Amazon and Sam's building distribution centers within 10 miles, the space program exploding, and zero other houses for rent(on MLS) in the area, we're so torn!  Hard choice when the money from a sale would finish paying off all the debt we've been working on the past couple years.. but we've been working on it with the laser focus if saving to buy an investment...  Good problems though.  So close to our start!

Scott Schuetz · Answer

Hi @Joshua Wilson this duplex is in my town. While technically it’s in Melbourne( the city of Melbourne owns a very small part of the barrier island) to all the locals, this is Indialantic. Melbourne is across the river and Melbourne Beach is a few miles south.

I agree with the others that this is likely not a good deal at this price but what makes it more of a bad deal for me is this particular street looks very undesirable. It’s one of the only streets in town with duplexes and triplexes and most of them look bad compared to the surrounding neighborhoods. We don’t really have any bad neighborhoods in Indialantic but this is probably the worst :)

The best benefit to this property is that it’s located across from a great beach and right next to 2 of my favorite bars!

Tchaka Owen · Answer

@Joshua Wilson - you're in Palm Bay, keep your eyes at home and take advantage of your area. It is one of the best bangs for the buck. Also, equity building at the expense of cashflow should not be an objective of yours if you're new. The cashflow often protects you in down markets when equity is given back. Once you have a number of homes under your belt, then venture to Indialantic for a duplex by the beach.

Tom Donnelly · Answer

@Joshua Wilson The property you mentioned got 7 offers within three days of being listed! The market beachside and in Brevard County in general is red hot. We are #2 in the country for economic growth, with both residents and businesses coming here from around the country. Combine that with low inventory and you have a situation where prices are quickly rising and good investments are more difficult to find. However: 1. Good deals can always be found with creative prospecting, financing etc..., and 2. Brevard County prices are still considerably than other areas in Florida.

Account Closed · Answer

You are correct, it's not a good deal. It looks like a negative cash flow deal for sure - 6k in property taxes. Only redeeming quality is that it is in Melbourne Beach, so you might be able to break 2k/unit rents. But to go any farther than that you either need a nice high sf unit with nice finishes and a pool - which these do not - or you need to actually be beach side with beach access. And to be cash flow positive, you need about 2100 in rent / unit from my estimates.

However I don't think these units are their highest and best use as long term rentals. As short term rentals I think it's very possible you could take home 200 a night, potentially get up to 5k gross. But that's not without a lot of work that all STRs come with.

Joshua Wilson · Answer

We're in a pretty good spot with the finances if we decide to rent it.  Monthly costs with homeowners insurance are about $1240.  Based on what my agent and I are seeing this house will rent for $1600-$1700.  So that's $350-$450 a month. Assuming it's less when it's switched to a landlord's insurance policy it could be pretty good.  We've been budgeting really hard the past couple of years and we're still only a couple of years out from paying our debts off with no change.  If we rent, we won't realize any of that money.  Saves us money on taxes and turns the investment into something self-sustaining much quicker than if we try to work it into our budget for bill pay off.

Matthew Irish-Jones · Answer

@Joshua Wilson We find deals on the MLS all the time.  The fact is most homes that are sold are sold on the MLS.  It is competitive and you have to move quick at times but, that is where most of the inventory is.  There is also less risk in a home that is listed by a licensed broker, and allows people to see it before hand as opposed to an auction per se.

Matthew Irish-Jones · Answer

@Joshua Wilson why do you realize the MLS is almost always bad investment deals?

Matt Devincenzo · Answer

You're missing that for an OO buyer this could be great. They can get a loan at more like 3-3.5% and maybe even at a lower down payment of 10-15%. Also they have a pool and can walk to the beach, if they want to share with their tenant then they can, if not then just close off the pool to the second half of the screened enclosure.

My 'best' investment was a duplex I bought to live in, and paid maybe 5% below market because it was my home not an 'investment'. I even put too much into the improvements and was probably break even the first two years while we lived there. But we lived there for ~$1,600-$1,800/mo in our part of the mortgage since the tenant paid ~$2,000/mo, and every month we built ~$800/mo in equity via principal pay down. Now it's worth easily 250K more than I still have in it, and I've collected nearly 50K in rents per year. Values have continued to climb pretty aggressively and rents have too. Even if they stagnate (rents and values) at this point it is still worth the long term paydown each month...for a non investor type, it is a huge wealth builder that 90% of the general population would be benefitted by.

Duplex with shared pool + how's my math?

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