Duplex in the sticks.

[Bill S.]

I found a duplex in a small town in a rural area. It's a 1x1 each side. Smaller units (550 sq ft) and owned by out of town people who inherited it and listed through a local RE company. It needs work (roof for sure, flooring - thinking allure). It's about 150 miles from me. Overall the area is agriculture and the area is in a slow decline population wise about 10% loss in the past 30 years. Not as bad as some areas but definitely not a growth situation. SFH home listings start at $20K and go up from there. Only a couple percent of the listing inventory is under $40K. Most in the $50-80K range.

It was listed for $23,000. Currently there are relatives living in it for free. I think I could rent each side for $250 as is. $300 if fixed up. I offered $5,000 cash and close this year. The agent didn't like it but said he would let the owners know.

He got back to me today and said they would do $15,500. I hesitated and asked if they would do owner financing he said he thought so. We discussed it a bit, talking in general terms probably 5-10 years and 3-5% rate. I didn't make a counter but left it that I would get back with him.

All mechanical systems are functional but old. Kitchens and baths serviceable but again old.

Looking for suggestions on what to counter. Run is an ok answer as well.

[Tom Sylvester]

So I primarily invest in the sticks, but from your post I'm not sure this would be good for you.

1 - Small towns typically do not have property management companies. So you either manage yourself, or hire someone to do things like showings, maintenance and renovations between turnovers.

2 - 1 bedroom units tend to have more turnover. Some of our duplexes have a 1 bedroom unit, but the other unit is 2+, which gets more stable tenants.

3 - Doesn't meet the 2% rule.

4 - Doesn't generate $100+ per unit assuming the 50% rule.

5 - Relatives living for free (may need to evict). Somewhat declining market limits renter pool.

If this property were in my investment area, I might pick it up, especially with the owner financing. But given that the above items and the fact that you are 150 miles away, I would recommend passing.