High Vacancy Rates-Should I Buy??

[Brady Hanna]

So we found a duplex to invest in and might have pulled the trigger a little too quickly without doing all of my due diligence. So here is my situation: We found a duplex in Grandview, MO which is a suburb of KC. It is a fairly blue-collar area. The duplex is in an area with mostly other duplexes. The one we are currently under contract with has 2 bedrooms and 1 bath on each side. It is completely renovated with new carpets, new kitchen, new bathrooms, etc. One side of the duplex is currently rented until April 2014 at $550. The other side is vacant. The price we settled on with the seller is $61k. We thought this was a great deal, because fully rented, even with the 50% rule, it cash flowed $2,046 annually, with a cap rate of 8.66%, 13.42% cash ROI, and 17.93% total ROI. I just recently discovered the vacancy rate in this area is 17%. Is this a deal-breaker in your opinion? I have the inspection on Tuesday and another 20 days or so until closing, so I have plenty of time to get out of the deal. Thoughts? Have any of you had any experience with 17% vacancy rates in your area? This would be one of the nicer duplexes since it is fixed up, so it might be a little easier, but I am concerned. Any help would be appreciated. Thanks in advance!

[Derek W.]

I have some units in high density unit-ville. There are lots of 4-rent signs all around me all of the time. But I stay filled. I am $10-20 cheaper per month than the average competition and I offer free basic cable for the first year. In my lower socio-economic area this is a tie breaker that I seem to win. I wouldn't walk from the deal. Just work harder and smarter than the other local landlords!