Analysis for Duplex

[Jonathan Makovsky]

I am still a RE virgin with no properties under my belt, so please feel free to punch as many holes in this analysis as possible:

Background: There is a duplex in probate that the previous owner lived in the duplex and passed 4 months ago. The children of the estate live out-of-state, and the house has been listed for about a month (supposedly) without an offer on it according to my buyer's agent. The other tenant is in the process of being evicted, and we cannot get into that unit. I am hoping that because of the situation the estate might be motivated to sell quickly.

Property: The place looks like it's in good working condition (new boilers, oil tank), but needs updating especially to the kitchen cabinets and oven. In this area no fancy kitchens needs to be put in. I have not seen the other unit yet, but it was supposedly in good shape (and I would like to include a contingency clause in the P&S agreement to reflect this).

Offer: They are asking $150, and I would come in with an all cash offer of just under $90K and a quick closing period to entice the owners (is the all cash offer necessary?). I expect that the place will need another $15K, so an all-in price of $105K - $110K. (After 3 months, I would like to apply for traditional financing when the property is stabilized.)

Numbers: From the research I've done, I believe I can fill each of the two units for $875/month ($1,750 total). The property taxes are pretty steep ($4,100). The property is heated with oil and has separate boilers, and separate electric meters. I will pay the hot water and water bill.

Thanks in advance for reading and appreciate your suggestions.

[Marcia Maynard]

We've been quite fortunate in buying properties from estates with all cash offers.

Of course, make your offer contingent on inspection. You can and need to get into the other unit after your offer is accepted, during the inspection phase. You may be able to see it sooner. I'd ask them, "What would it take for me to see the other unit?"

Who told you the other unit was in good shape? Do they have any recent photos to show you? Is the current tenant being evicted for cause? Could be helpful to know. Evictions can go smoothly or they can be quite contentious. If the latter, there may be significant property damage left behind.

We made the mistake of buying an 8-plex once and believing what we were told ahead of time about "no deferred maintenance" and that we couldn't go into a particular unit because the tenant was sick. Neither was true. The unit we couldn't see ahead of time turned out to be the most run down and most outdated of all.

Also, get your own feel for the property.... walk the neighborhood, talk to the neighbors, and visit the property at different times of the day. Observe and listen. May be helpful.