First Rental Property Analyst

[Blair Fontenot]

Hi All,

Looking to purchase my first rental property - actually more like two.  I am purchasing (2) duplexes next door to each other as I figured it would be a safer bet having both instead of competing with someone if we each owned one.

Owner was asking for $150k for each property we offered $260k for both which was accepted.  Three of the units are currently under lease at $850/each one is expiring this month but they are asking to renew. 

It appears the owner didn't invest much money back into the property so we will be painting the outside, cleaning up, and redoing the vacant unit to hopefully increase that unit to $950. 

In that area there isn't much for comps for multifamily properties so my realtor provided me with a few details:

Average Cost per Sq. Foot - $112.71

Estimate Market Price Based On:

Average Cost Per Sq Foot $216,404

House Price Index $158,869

Average Sales/Tax Appraisal Ratio $146,844

My current calculations:

P&I - $13,655.52

Property Tax - $ 7,686

Annual Insurance - $1,972

Maintenance - $4,200 (10% rent)

Cap Ex - $4,200 (10% rent)

Water - $3,000

Vacancy Rate 5%

Figuring only a 4-5% ROI on the first year and increasing by 1% each year. My CapEx could be alittle high as the property has new roof and A/C units but I do have upgrades I would like to make to increase the value. I can look at pushing the water utility out to tenants as leases expire and renewals come up. Any advice as the ROI doesn't look appealing.