Is this a deal?

[Christopher Hunter]

I just came across this potential deal.

Duplex 2/1,2/1

1,800 sq ft

$88,500

11% cap rate is questionable

I do not have expenses, can I use 50% of gross rents just to see if it makes sense? $49/sq ft, land value per county assessor is $9,000. To calculate my cape rate I just did a real quick equation of gross rents divided by asking price. This is a learning exercise for me.

Here is the formulas I tried to use:

cap rate = NOI/asking price

replacement cost = $/sq ft + land value

Did I miss anything or just everything?

[Shawn Holsapple]

Originally posted by @Christopher Hunter:

@Rodney Kuhl Let me ask you this. this is an email I received. What do I need to be looking at in this email? Is there enough information here to analysis this property? Duplex

3117-3119 e Michigan st

lock box

$18k

2br-1b

881 sf

tax $1030 / yr

1900

LOL - I owned the double next door a couple years ago. That's a $375-$400 per side area [and pretty rough as well]. I would plan on spending at least $3k-$4k per side once the tenants move out to get it back up to speed.

Do you have a property manager yet? If not, you need to get one FIRST and then start looking. You can use them as a good resource to tell you if it's a good area or not.

You will have some trouble finding a PM that will take this one on due to the area and low rent.

Personally, I tell my out of town clients to start with strong, post war, SFH in blue collar neighborhoods and go from there. The NOI on paper IS very tempting with these low cost properties but they almost never pan out [ask me how I know!]. High vacancy rates, vandalizim, tenants that don't respect anything, etc.

I had over 22 doors at one point - all similar to this one. After two years of heart ache, I was barely able to sell them and now only own nicer multi-units or SFH.

I hope that helps.