Needing some guidance with potential deal :)

[Amber Stout]

Hello BP,

I am in the process of analyzing a deal and need some guidance. The property is in St. Petersburg, FL and is a duplex tenant occupied month to month. Everything in the home has been renovated a year ago and all is updated. 

This property would be owner financed with 15% of the sale price $130,000 at 8% amortized over 30 years making it a monthly payment of $810.

Total rents is $19,200

Water/Sewer/Garb. $1,300 last year
Insurance $1,627
Tax $640

Tenants pay electric, cable, etc. on their own. 

Although I have not analyzed many deals... based on the 50% rule alone with the $810 mortgage payments, the numbers don't appear to work out great.

[Robert Breen]

HI Amber;

   I agree with Jay.  You need to make very sure you are looking at the whole picture.  Maintenance costs should be included because you always have them.  Will you self manage or hire that done?  Breaking everyhting down by the month is a better way to see the whole picture.  

 If I am reading your post correctly the purchase price is $130,000.  Your going to pay 15% down or $19,500 down. 

Expenses broken down monthly come to

$54 Taxes

$135 Insurance

$109 Garbage, Water, Sewer

Management usually runs 10-15% if you hire it out.  So that would be 160 a month. That would not include maintenance costs which should be explored. 

In that case you are looking at an expense of $1260 a month (not including maintenance) 

Rents are $1,600 a month if both units stay occupied always.  So that leaves $340  a month over and above expenses.  If maintenance costs run $100 a month then you are looking at $240.  

Using your downpayment of $19500 and a yearly before tax ROI of 2880 that brings you a $14.7% return on your money. That is if both units are occupied 100% all year. A simple 10% vacancy rate would reduce your annual ROI to 5%.

For me personally I think those look like some harsh numbers I would have to reconsider.  

Just some thoughts.