First duplex under contract!

[Dave Hurt]

I originally posted this in my intro thread, but this forum seemed a more appropriate place. Not quite sure if we can call this a success story just yet - we still have to go through due diligence...but still excited to have the first (hopefully of many) multifamily property under contract!!

Brick duplex with identical 2/1 units

36k purchase price (most recent tax assessment was 65k). Motivated seller.

1 unit rented on a 12mo lease (renewed a month ago) at 475/mo, and the seller is to have a tenant in the second unit before the end of our due diligence period (April 15). We will rent the second unit for 500. Tenants pay all utilities.

We estimate 2k or so to 'freshen up' the vacant unit (new paint, appliances, some minor repairs).

Total cost = 38k

We obtained a 120-month interest-free private loan, so that puts our monthly financing cost at 316.67.

When you look at the property using the 50 percent rule:

975/2= 487.50 to cover our loan cost (and it ends up being 487.50-316.67 = $170.83/mo after putting aside 50% to cover insurance, taxes, cap exp's etc). Not quite $100/unit/mo but close, and after we increase rent in the second unit to 500, we'll just about be there.

So, the real numbers will be:

975.00 - 317.00 (loan) - 75.00 (prop taxes) - 30.00 (insurance) = $553/mo or $6,636/year which is basically ROI of infinity, since we put zero initial cash into the deal. If we use the tax estimate, we are also immediately gaining 29k in equity.

Overall, we are pretty happy with this deal, now let's hope nothing 'deal-breaking' turns up during inspection!