How Good Is This Duplex Investment?

[Mark L.]

The monthly rent is about $600 per unit, with potential to increase to $650 in the next year.

Each unit is $54,900, but I plan on buying 2 units for a total of $109,800.  Thus the monthly rent would be $1,200 with the potential to increase to $1,300 in the next year. 

Real estate loan with an interest of 4.25%, 30 years amortization, with 10% down.  

Down payment would equal $10,980 (2 units).  

Loan payment would be $98,820.  

Monthly P&I would be $486.

Expenses:

Property tax of $56/month (annual $672).

Property insurance of $80/month.

HOA fee of $300/month, which covers water & sewer services, repairs, lawn service, trash removal, and property management.

Total expenses + debt service equals $922/month, so the cash flow from the rent of $1,200 equals $278/month, or $3,336/year.  

CAP rate = 8.35%.

Cash on cash = 30.38%/  

1 Year investment return = 45.56%.   If the rent potentially increases to $1,300/month, the investment return will increase to 55.32%.

Any thoughts on this deal?  This is the data the seller presented to me.  It looks like he is missing the vacancy rate & closing costs though, maybe some other things too.