First investment property analysis

[Karen Kushner]

First post on the Bigger Pockets forum, and looking to buy my first investment property. I hope to actively manage my first few properties as I build my portfolio. The purpose of this post is to practice utilizing the formulas needed to analyze this particular deal and see if anyone has advice/suggestions.

Located in suburban Phildadelphia in a lovely, walkable area to many shops and restaurants, this is a duplex property (2br/1b and 1br/1b) listed for $629,000. The building has been extensively renovated by the prior owners in 2022 including new heat/ac, appliances, flooring, kitchens/bathrooms, roof. Pretty much turn-key. It is currently occupied by tenants - one is month to month paying $1595 and the other has a lease until Jan 2025 paying $1675. Net income = $39,240

Monthly operating expenses are as follows: Trash - $33, Landscaping/yard - $66, Electric - tenants pay, Water - $95, Maintenance $87

Monthly taxes about 3K

So, gross expenses are at $41,064

If I'm doing the calculations correctly, my net operating income is -$21,888 and cap rate is -3.4%.

Obviously the current numbers look terrible for this investment, but I feel like the rent should be raised significantly based on comps (above 2K each unit). If that were the case, let's say 2K and 2.2K per month, making monthly income =4.2K and annual = 50,400K.

Now my NOI=$9,336 and my cap rate is 1.4%. Still not great, right? I think we will pass on this property unless there are any other opinions out there?!

[Karen Kushner]

Thank you Kevin! I appreciate your suggestions and input! I’m just learning so this was really helpful! I’ll probably upgrade to the pro membership for access to those tools and calculators. Thanks again