Is this Duplex a good deal?

[Robert K.]

I am looking at purchasing a duplex and struggling a bit with the numbers.

They are asking for $115K for a 2700 SF Duplex in Dallas. I expect 20K in repairs. The tax value was $215K in 2009 but dropped to $162K for 2010 and that is where it still is. The property brings in $1,700/month but will be unoccupied when I purchase it.

I am considering a 15-year loan at 5.99 of $108K. Excluding the use of a management company, I am looking at $185 net cash flow but only $50 with the use of one. With a 30-year loan (which I won't do), cash flow is more like $300/month including the use of a management company.

Using the 2% rule, I am at 1.25% in terms of rent as a % of purchase price. Granted that the 50% rule assumes a 30-year vs. the 15-year loan, I still think the numbers are a bit low. What do you think? Is this a good deal?

Your input is greatly appreciated!

[Scott R.]

You can always pay off a 30 year mortgage earlier, however you cannot take 30 years to pay off a 15 year note. The rates are so low at this point I don't believe the 15 year outweighs the 30 year at all. At least if it's 30 years and you get into tenant trouble, ie long eviction, you aren't struggling with that higher payment.