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Updated over 6 years ago on . Most recent reply

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Renee Burke
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Property analysis- What is your opinion on this duplex?

Renee Burke
Posted

Hello, so I am doing my research and using the free tools available on the site (for a minimum amount of time) to analyze duplexes. I picked a random duplex and did an analysis. Unfortunately, because I am not a paid member, I cannot share it with you. However, here is the link to the property https://www.realtor.com/realestateandhomes-detail/...

With a 20% down, there is negative cash flow for many, many years. I do have some questions:

a) Using this particular property, what would someone have to do to get a positive cash flow? HIgher downpayment? HIgher rentals? Thoughts?

b) Also, when doing the analyses, I used the $1500 rental income (one side of the duplex) because I would be living on the other side. Is that the correct way to do the analysis?

Thanks

Most Popular Reply

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Clayton Mobley
  • Birmingham, AL
947
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875
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Clayton Mobley
  • Birmingham, AL
Replied

@Renee Burke I agree with @Andrew Allen , this property won't flow even if you rent out both sides. The main issue, I think, is that this looks to be a very A area, based on the info provided on the listing. Meaning this is where people with money live, and everyone else wants to live. Looking at the prices of the surrounding props and the school ratings, this looks like an area for appreciation plays, not cash flow investments. You very rarely find an A property that cash flows well, because of the exact issue you see here - you PITI (principal, interest, tax, insurance) is far too high. With a price of $500k+ and rents of only $3k (if you rented both sides, but not sure where you got this figure) you're not going to make the numbers work. I am certainly not a 1% rule purist, but you can't be this far below it and expect to make money monthly.

Plus, since we're nearing the top of this cycle, I would say you'd be buying at the top of the cycle in an area that's already seen a lot of appreciation (almost 60% since 2009 based on the listing history). 

If you're looking for cash flow, you'd be better served looking one step down, in solid B/B+ areas. That's our bread and butter because we know from experience that high tier props don't flow and lower tier props are more work than they're worth.

Good luck!

  • Clayton Mobley
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