Realtor seems wrong?

[Adam Berlinberg]

I am in the process of getting my first residential deal, and just making sure I’m not doing something wrong. I think my realtor is and just trying to sell as quickly as possible. Duplex in VHCOL city listed at $849,000. Just dropped $50k, which is the first red flag as things go quick. Current rent in one half is $2750, other side vacant. Market rent is around $3000 each side ($6k total). I am doing conventional 30 year with 20% down at 7% rate. No utilities. Taxes were $3550 last year, insurance about $200 a month. Property management around 9%.  I’m getting that to be about a 5% cap and -1% cash on cash. He is somehow getting 10% cash on cash and says it’s a winner. He also says you can’t including reserves for vacancy or maintenance and that is old school, again just making sure I’m not missing something. I think this one is a hard pass, he thinks it’s gold, just looking for outside advice.

[Russell Brazil]

Quote from @Adam Berlinberg:

I am in the process of getting my first residential deal, and just making sure I’m not doing something wrong. I think my realtor is and just trying to sell as quickly as possible. Duplex in VHCOL city listed at $849,000. Just dropped $50k, which is the first red flag as things go quick. Current rent in one half is $2750, other side vacant. Market rent is around $3000 each side ($6k total). I am doing conventional 30 year with 20% down at 7% rate. No utilities. Taxes were $3550 last year, insurance about $200 a month. Property management around 9%.  I’m getting that to be about a 5% cap and -1% cash on cash. He is somehow getting 10% cash on cash and says it’s a winner. He also says you can’t including reserves for vacancy or maintenance and that is old school, again just making sure I’m not missing something. I think this one is a hard pass, he thinks it’s gold, just looking for outside advice.

 Reserves are not a factor in cash on cash. Vacancy is only a factor in cash on cash when it actually happens.