I'd like to ask BP to run their numbers on a potential deal Im looking at and give me your thoughts on to buy or pass.
New
construction duplex (x2 3bed/2bath), Asking price $315,000), market
rents are $1300 per door, most likely 25% downpayment, insurance approx
$120 a month, tax approx $15 a month, HOA $20 a month, add other costs you would typically account for also....
Real Estate Broker · Apopka, FL · Member since 2017 · 492 posts · 528 votes
6y
@Colin M. I believe I know the exact property you're discussing as well. I've looked and negotiated on several of these guys duplex builds on Yak, Albatross, Bittern. I've even recorded a walk through video of 655 Yak. Walked and offered on one on Yak and then followed up with a different buyer and another one on Yak Ct. Two on Bittern are their 9th and 10th builds of these I believe. Taxes are going to be approximately $3800-4200/yr according to Polk Co Tax estimator. I had an insurance quote of $538/yr for the whole building, but most of their build sites are in unspecified flood zones so you'll need an elevation certificate for accurate flood premium which could be another $800-1400/yr. I believe Yak and Bittern are flood zone, but Albatross wasn't. Could be mistaken there.
There are solid comps for $1300-1395/mo in rent per side, and I've confirmed this with a couple PMs. These sellers have a little wiggle room and I had gotten them to a pretty good number, but what held up my buyers interested is that there's been an increasing supply of rental units in this price range and in this specific area of Poinciana. They are not being absorbed quickly enough to keep building and buying at the moment. PMs I spoke with recommended going Section 8 with the units to have an easier time filling. Market rent would still apply, but the other rentals sitting on the market don't look to be Section 8.
Being new construction and needing very minimal reserves for repairs and capex, the numbers worked out pretty well. It is not the same as buying a 20 year old duplex for the same price and rents. Every single thing is brand new, so you have full lifespan to plan reserves for replacement. Polk Co has really low taxes as well. These guys had a similar one in Deland and estimated taxes were nearly double. About $7k/yr. This is why people that recite the 1% rule on every deal get tiring. Same property, same basic rents, same price, two different counties and huge swing in taxes. At $3600/yr in additional taxes it costs $300/mo extra for the same "rent/price ratio". So $2600 gross rent on $315k (brand new) acquisition may work out awesome in Poinciana and horribly in Deland. Suburbs of the same metro with vastly different taxes and similar rents.
As appealing as these duplexes are (much cheaper than new duplexes anywhere else in Central FL I've seen), I ended up closing on better deals with the clients who had looked at these duplexes. Most recently was a 3/2 house and 1/1 guest house in Eustis (Lake Co.). It needs about $1500 in siding repairs and a $1000 water meter to properly split the water bill and add $125/mo to net income, otherwise all systems and finishes are excellent. $196,500 price paid and $1900/mo in gross rent with existing tenants in both units. They are below market by about 15% but paid by very clean, gainfully-employed, early-paying tenants, zero vacancy and they'll bump them closer to market at the end of the lease.
I'm not saying the Poinciana duplexes are a bad deal, but be sure to account for estimated taxes, higher than typical rental inventory, and potentially unknown flood insurance premium. For a zero-rehab turn-key rental, its a pretty solid deal. I've seen similar new duplexes in Apopka (NW Orange Co) sell for over $400k with rents in about the same ballpark. I wouldn't want to have to re-sell the Poinciana duplex anytime in the next 3-5 years if these guys keep cranking out new ones, but I think on a 7-10 year horizon they'd be a pretty solid, low-headache hold.
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
6y
Where are you located and why do you want to buy a new construction duplex? You will be paying as top dollar as possible in a multi-market anywhere where you best buys are where you can buy lower and add value to your property. You are way under 1%, but it could be market-specific. You'll want to lay out a lot more info about where and your why to get the best help in here.
Property is in Orlando so most properties there are relatively new, any older are SFR and in less sought after areas. Also - I am an out-of-state buyer (NYC) so do not want to deal with having to renovate on this one, looking for a near turnkey property to fill quickly.
What do you mean by way under 1% ? COC? What calculations would you do if looking to purchase yourself?
Real Estate Agent · Orlando, FL · Member since 2017 · 1k+ posts · 2k+ votes
6y
@Kirk R. I do not think this is actually in Orlando I believe this is in Polk County which has lower taxes. I never said $120 a month was correct I simply stated that your assessment was likely not correct. He is probably basing his calculation on the previous year's taxes which if this is new construction would be inaccurate. I have made no suggestions as to his calculations. You asked about what you saw him post for taxes I responded. You, in turn, replied with what your opinion of the taxes would be. I simply disagree with you. I have not provided my opinion on what I think the taxes would be because I do not have nearly enough information to provide that kind of advice. When people say a property is in Orlando it could be located in 1 of 5 different counties that comprise of the greater Orlando area and the tax rates do differ from one to another. I have offered help but have not given an opinion as to what the taxes would be in this forum. I would not make such a broad statement as taxes would be $xxxx in Orlando because everything is relative to the county the property is within.
Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
6y
@Colin M. As @Kirk R. said, your taxes are way off. Log onto the county assessor's website and figure out roughly what other properties of similar square feet are paying annually and that'll give you a baseline. Gosh, @Tyler Gibson can probably tell you what number to expect. But like Kirk said, here in IL and MO we have high property taxes and I expect roughly $1.50 to $2.50 per square foot annually in MO.
Investor · Omaha, NE · Member since 2019 · 130 posts · 139 votes
6y
@Colin M. Brother this does not look like a deal to invest in. This is not an inexpensive property to get into at a 315k price tag and the numbers do not indicate there is a lot of margin.
Also, you are out of state so you will have management fees whether the management is good or bad. I understand it is new construction, but still budget some monthly amount such as 5% for maintenance and 5% for vacancy. I would stay away from this one!
@Kirk R. I do not think this is actually in Orlando I believe this is in Polk County which has lower taxes. I never said $120 a month was correct I simply stated that your assessment was likely not correct. He is probably basing his calculation on the previous year's taxes which if this is new construction would be inaccurate. I have made no suggestions as to his calculations. You asked about what you saw him post for taxes I responded. You, in turn, replied with what your opinion of the taxes would be. I simply disagree with you. I have not provided my opinion on what I think the taxes would be because I do not have nearly enough information to provide that kind of advice. When people say a property is in Orlando it could be located in 1 of 5 different counties that comprise of the greater Orlando area and the tax rates do differ from one to another. I have offered help but have not given an opinion as to what the taxes would be in this forum. I would not make such a broad statement as taxes would be $xxxx in Orlando because everything is relative to the county the property is within.
he had taxes at $15 & $20. then you said $120 which isn't anywhere that I could see in his post. my I want taxes of $20/month was more to illustrate point no way gonna be close.
I looked up what taxes are on $315k property in Orlando. $400 to $500. FACT.
you responded with no way not in Florida. & now you think there is lots of variance county to County. if you say so (sarcasm) whatever don't care no horse in this race.
Real Estate Broker · Greater Rochester/Finger Lakes Region · Member since 2016 · 61 posts · 63 votes
6y
I think you need to look at other markets if that's what's available in yours. In Rochester for example, for 315k you should be getting 5k in rent/month minimum. Probably closer to 6k. High taxes and PM would need to be accounted for, but I can hardly wrap my head around spending that kind of money for $2600 in rent per month. 13% C on C? SMH
I think you need to look at other markets if that's what's available in yours. In Rochester for example, for 315k you should be getting 5k in rent/month minimum. Probably closer to 6k. High taxes and PM would need to be accounted for, but I can hardly wrap my head around spending that kind of money for $2600 in rent per month. 13% C on C? SMH
Wait, you can buy a 315K property in Rochester and collect 5-6k in rent? Where do I sign up? Did I understand you correctly?
Real Estate Broker · Greater Rochester/Finger Lakes Region · Member since 2016 · 61 posts · 63 votes
6y
Not one property. Try 6, 50k properties. But PMs are typically awful and Taxes are high. That needs to be accounted for. Take a look around the forums and even Zillow. Same situation in Buffalo and Syracuse if you know what to look for.
@Colin M.@Tyler Gibson, FYI, if your an out of state investor I would suggest reaching out to Tyler. I live in Orlando and although I have never met Tyler he has answered some of my rookie questions and provided accurate advice through BP. That’s the point of this platform, connect with people who can help with your journey / goals.
Thank you all for your feedback, this is the reason i posted in the beginning as i figured something was innaccurate. Yes it is the property in Kissimmee @Tyler Gibson and the taxes are what was shown on the Post so assuming it much be the land tax and not property itself.
I would ask you all here, if you were running the numbers on this deal, what would your calculation look like? Do you used the 4-square method i used from BP? Or other?
Curious to see how people here figure their deals so i know all bases to cover.
Real Estate Agent · Orlando, FL · Member since 2017 · 1k+ posts · 2k+ votes
6y
@Colin M. I think the method you used is correct except for taxes and I noticed you had 5k in rehab as part of your acquisition cost. This being new construction you should have no rehab cost. If I remember correctly this builder was providing a home builders warranty and was using a regular contract which here in Florida can require the seller to make repairs of anything found on the inspection up to a dollar amount.
Realtor · Central Florida-Orlando · Member since 2014 · 1k+ posts · 892 votes
6y
@Colin M. Like Tyler, I am a local Realtor®/Investor. I'm happy to help in any way to evaluate deals you are looking at. I am well connected to all the top wholesalers too if you are a cash buyer. If not, I can help locate other areas that may interest you. If Kissimmee/Polk County is what you are looking for, there are plenty of multi-family units in that area. This market is always lacking in mulit-family inventory and when they do come up, they go super quick.
As far as evaluating, I like to start with 40% of revenues go to expenses (vacancies, utilities, lawn, pest, taxes, insurance, management (always include this even if you self manage!!) as well as advertising etc. That leaves 60% for profit and debt service. The 1% rule you asked about is typically that you want the rent to equal 1% of the total purchase price. So in your case 1% of $315,000...you would want to collect $3150.00 per month in rent. Have you checked Zillow, Rentometer etc for rent analysis in that area, $1300/door sounds low for a 3.2. If you are interested in short term rentals, your money will go a lot further in that area. you could get a SFR and generate $50k+/yr and have a place to come on vacation!
Hope this helps, feel free to reach out if I can help in any way. Good Luck.
Real Estate Broker · Apopka, FL · Member since 2017 · 492 posts · 528 votes
6y
@Colin M. I believe I know the exact property you're discussing as well. I've looked and negotiated on several of these guys duplex builds on Yak, Albatross, Bittern. I've even recorded a walk through video of 655 Yak. Walked and offered on one on Yak and then followed up with a different buyer and another one on Yak Ct. Two on Bittern are their 9th and 10th builds of these I believe. Taxes are going to be approximately $3800-4200/yr according to Polk Co Tax estimator. I had an insurance quote of $538/yr for the whole building, but most of their build sites are in unspecified flood zones so you'll need an elevation certificate for accurate flood premium which could be another $800-1400/yr. I believe Yak and Bittern are flood zone, but Albatross wasn't. Could be mistaken there.
There are solid comps for $1300-1395/mo in rent per side, and I've confirmed this with a couple PMs. These sellers have a little wiggle room and I had gotten them to a pretty good number, but what held up my buyers interested is that there's been an increasing supply of rental units in this price range and in this specific area of Poinciana. They are not being absorbed quickly enough to keep building and buying at the moment. PMs I spoke with recommended going Section 8 with the units to have an easier time filling. Market rent would still apply, but the other rentals sitting on the market don't look to be Section 8.
Being new construction and needing very minimal reserves for repairs and capex, the numbers worked out pretty well. It is not the same as buying a 20 year old duplex for the same price and rents. Every single thing is brand new, so you have full lifespan to plan reserves for replacement. Polk Co has really low taxes as well. These guys had a similar one in Deland and estimated taxes were nearly double. About $7k/yr. This is why people that recite the 1% rule on every deal get tiring. Same property, same basic rents, same price, two different counties and huge swing in taxes. At $3600/yr in additional taxes it costs $300/mo extra for the same "rent/price ratio". So $2600 gross rent on $315k (brand new) acquisition may work out awesome in Poinciana and horribly in Deland. Suburbs of the same metro with vastly different taxes and similar rents.
As appealing as these duplexes are (much cheaper than new duplexes anywhere else in Central FL I've seen), I ended up closing on better deals with the clients who had looked at these duplexes. Most recently was a 3/2 house and 1/1 guest house in Eustis (Lake Co.). It needs about $1500 in siding repairs and a $1000 water meter to properly split the water bill and add $125/mo to net income, otherwise all systems and finishes are excellent. $196,500 price paid and $1900/mo in gross rent with existing tenants in both units. They are below market by about 15% but paid by very clean, gainfully-employed, early-paying tenants, zero vacancy and they'll bump them closer to market at the end of the lease.
I'm not saying the Poinciana duplexes are a bad deal, but be sure to account for estimated taxes, higher than typical rental inventory, and potentially unknown flood insurance premium. For a zero-rehab turn-key rental, its a pretty solid deal. I've seen similar new duplexes in Apopka (NW Orange Co) sell for over $400k with rents in about the same ballpark. I wouldn't want to have to re-sell the Poinciana duplex anytime in the next 3-5 years if these guys keep cranking out new ones, but I think on a 7-10 year horizon they'd be a pretty solid, low-headache hold.
