Who is right? Who's the crook?

[STEPHEN YUAN]

Guy 1: My mentor offered a Duplex R/E option to me at 17,000 with purchase price being 85,000. It is located at Del Rio, Tx 78840. Basically here's the numbers he told me:

$85,000.00
Investment	$17,000.00
Rent	$1,3200.00
insurance	$900.00
taxes	$1,500.00
repair	$555.00
10% management fee	$1,320.00
Utility	$1,100.00
80% mortagage payment	$376.82

Guy 2: My colleague's boyfriend told me I need to include 10% maintenance fee plus vacancy rate should be 10%. Therefore, the conservative monthly rent income should be 1,100.


Guy 1(My mentor) counters that house does not need 10% maintenance fee because he does preventative maintenance. Therefore, maintenance fee is just the repair fee. He told me he changed all light bulbs to CFL light bulbs and check all cables for shorting when I pressed on exactly how the preventative maintenance was done.

Guy 1(My mentor) further counters that vacancy rate is actually 7 days per year cuz the area is hot so I shouldn't use 10%.

Who's right?

[J Scott]

No maintenance costs?  What preventative maintenance did he do to ensure that a neighbor kid doesn't accidentally throw a baseball through a window?  Is his preventative maintenance so good that a toilet won't break any time in the next 20 years?  Is the HVAC new?  If not, how does he know there won't be a maintenance issue with it?

Sorry, I don't buy it...

As for 7 days of vacancy, perhaps that's possible for a very experienced landlord who doesn't mind the hassle of trying to do showings before the existing tenant leaves and who can do a make-ready (paint, carpet, etc) in just a couple day.  But, for a typical landlord, that's ridiculous.  It's more like a month every 1-2 years, or about 4-8%, at best.

Sounds like your mentor cares more about making money than about doing what's best for his student...