Duplex Help in Ogden UTah

[Craig J Chelette]

Hey all,

I have a duplex under contract in Ogden Utah. It is a 2/1 with 700 sq/ft per side. Asking price was $154900 and offered $144900 and was accepted. Roof needs to be redone. One side had a tenant who smokes in the unit. I am thinking about removing both tenants asap and trying to get the smoke smell out but removing all carpet, whipping down down every surface, getting ducts cleaned and running an o-zone machine if needed. There is about $16,000 worth of work that I can calculate from paint and new flooring. I am pretty sure the seller will not budge on price anymore. I need help determining if this is still a good deal.

Numbers:

Sale price: $144,900

Rehab: $16,000 including new roof (roof is about $8,000 and has 2-3 years left so doesn't have to be done immediately)

Down payment (25%): $39,500

Debt service: $711 PITI, HELCO payment $326 (interest only would be $118 but want to pay back principle ASAP) . Total: $1,037'

Current rents per side: $600. should be able to get up to $700 with rehab.

Cash after debt services: rent $600 per side- $163

rent $700 per side-$363

In this area, its difficult to find deals in the 1% rent to purchase price ratio.

Let me know what everyone thinks. Am i missing anything? I will keep all cash after debt services till i build up a nice cushion, then start putting even more towards HELOC principle since it is a variable rate. Thanks!

[Jon Neviaser]

Hi Craig,

It sounds like a deal with a thin margin of error.  I suggest accounting for vacancy, maintenance, and property management fees.  Even if you plan to manage yourself, this should be accounted for to accurately asses the investment, because if you were to sell it another investor would calculate this into the cap rate.  I'm happy to discuss further, let me know.