Beginner - Think I Found A Decent Deal - Your Thoughts?

[John Van Fosen]

I'm completely new to this, I've been looking at properties for a few months now. Think I found one I want to pursue. I'm looking in Columbus, Ohio.

Looking for the expert opinions here!

Here it is:

2 units, both 2br 1 bath

Both units rented at $625 a month, $1250 total.

Asking price: $64900

I would be putting 25% down, $16,225

Insurance $900/year.

I'm assuming $3,000/year in expenses - Is this overly conservative? I'd have to hire someone for lawn care and snow clearing. Other misc maintenance I can do myself.

I'm counting putting 10% net income into a reserve account ($1,500/year)

2012 property taxes: $1,370.82

Total cash outlay: $16,225 + $3,000 = $19,225

15 year mortgage at 4.5%

Estimate closing costs $3,000

Total Monthly Payment: $561.60 (including taxes & insurance)

Last Sale date: October, 1996: $61,900

County Value Details

Improvement Value Appraised $49,400 taxable $17,290

Land Value Appraised $12,300 taxable $4,310

Total Value Appraised $61700 taxable $21,600

My Thoughts

I am assuming a 94% occupancy rate of both units.

Rents are average for the area.

I come close to the 2% rule at 1.93%

This gives me a BTCF of $238.40/month for the property. Is this a good value for the current market?

I could do a 30 year mortgage for additional cash flow - what are people's thoughts on this? Does it make sense over the long term to stick with the 15 year to pay less interest?

There are several other very similar properties in the are being sold by the same owners. If this deal works out, I would consider purchasing more from them.

My main goal with this property is some decent cash flow. All net income would be saved and reinvested in the business I'm trying to start.

I am ignoring any tax/depreciation benefits.

[Paul Hextell]

John, I have bought a handful of duplexes (Florida) in the last couple of years. Really like working with duplexes so far. Anyway, I'd think long and hard about taking a reduction in cash flow for the 15 yr. mortgage. Cash flow is key, especially if you want to add additional properties in the future. Remember, if things go well for you in the years ahead you can pay down your mortgage with extra principle anyway.

Are you sure you have no upfront costs? How is the roof and the AC or furnace, appliances, etc.? Is it on septic and/or well? If you are correct that there are no looming capital improvements to be made, then your prospective deal looks pretty good to me. Is the taxes and insurance in the $3000 expense figure? I have found that the expenses at my duplexes, including taxes and interest payments, is typically about 40% of the rent total. The $3000 figure seems a little low but maybe you have it right.