Duplex Help please

[Adrian Mata]

I found a duplex that is pretty nice in Indianapolis and being that I'm from WA and CA it is very reasonable but when I use the analysis given, I'm having trouble. Am I doing this correctly?

These are 3-bed 1-bath, and should bring $600 per month each side quickly. We want to create another bathroom and reconfigure the kitchen.

As-is with a mortage of $361 and using the 50% rule...

Gross rents $1200 per month ( 50%) = $600

$600-$361= $239 per month cash flow

Purchase price: $ 79,500
Closing Costs: $1988 - computed from my spreadsheet
Downpayment: $15,900
Loan amount: $63600
Repairs: $5000-I have no idea. I'm totally guessing.
Rate: 5.5% - I got this from a mortgage banker at the local Chase
Term: 30 years
Mortgage Payment: $361

Vacancy: 8%

Gross rents: 13248 - with 8% vacancy included
Property Taxes: $2036 annual
Insurance: $480 -I estimated that at $40 per month
10% gross rents for maintenance-1440
10% property management fee- $1440
1st month's rent for property management leasing- $1200
Administration- $1500 -cost to set up the LLC with a lawyer
Yearly cash flow: $934
Cash on cash return: 4%

The MLS sheet says the tenant pay all utilites but I'd have to pay the water. I didn't allocate any advertising costs because the PM does that.

Am I on the right track with my calculations?

[Harry M.]

@Adrian Mata

There's a functioning toilet in the kitchen???!!! That is so weird.

Regarding nailing down repair costs, a lot of GCs will do a pre-purchase walk through, and give you a decent estimate for around 100.00, sometimes less.

One thing that is good practice is to first make an itemized list of everything you can see that needs work, and take a stab at estimating it. Then if you do the walk through with the GC, you'll learn more having given it a try first, and noting the things that he sees that you missed, and where you were off on the numbers.

Closing cost estimates - near the beginning of the process the bank will give you what they call a Good Faith Estimate for closing costs. This is just what it says it is - an estimate. It can be pretty close to a fair bit off, but it will at least give you an idea, as well as an itemization of the kinds of costs that go into closing. You get your real closing costs a few days before closing, when the title company sends you the provisional HUD1 (full settlement statement w/ everything on it for both the seller and buyers side).

Insurance - the one tip I have here is to keep calling around. This may be a good price for the area, or maybe not. On my first property (this was before we'd found our current insurance broker - it's easy now) we called well over a dozen companies. The prices vary wildly (literally by a factor of two or more in the extreme cases).

Good luck!

-Harry