My First Deal (Buy and Hold Duplex)

[Jake Hartnett]

Hello everyone,

I would like your help analyzing this deal. I don't see anything close to 2% deals around here, so I'm just looking for something better than 1%. I work full time so I'm not looking for a fixer-upper, just a nice place that cash flows and doesn't suck too much time.

This deal is a solid duplex built in the 70s (most places around here were built in the 1880s.

Asking $139,000 (but its been on the market for a few months)

$1700/month rent (1.22% of asking price)

tax $2700

insurance $1400

Maint.CapX (10%) $2040

Management (10%) $2040

Vacancy (10%) $2040

NOI $10,180

20% down at 4.5% interest for 30 years is $563/month $6756/yr

Cashflow $3424/year ($285/month) so $142 per unit

I also expect over $2000 in tax benefit.

That's a profit of $5424/$30,000 down for a 18% return on investment including the tax benefit.

There is very little inventory in town for rentals, so I expect a much lower vacancy rate.

Roof is newer, water heaters new, furnace new. Kitchen/Bathrooms can use updates someday, but are very usable.

Any feedback is appreciated.

Thanks.

Jake

[Michael Wentzel]

@Jake Hartnett Even if you take the take benefit out, you're looking at 11% cash-on-cash return. That's not too bad if it is a decent property and a decent location. 

I appreciate that you put the property management in there. Many people don't and it makes their number look better than they really are. That being said, could you manage it yourself for a year or two to make some extra cash and get to learn a bit about managing tenants? A duplex in a good area should give you good tenants and not too many headaches.

One percentage I might question is the 10% for maintenance and capital expenditures. I put mine at 15%, but I have older properties. I have seen many others on BP argue for a separate cap ex line of 10% in addition to the 10% on maintenance. So you might be a little low there, but every property is different.

If you have the cash, it seems like a pretty low-risk first step. I hope it goes well for you.

Mike