Closed and Inspected My First Duplex

[Andrew Banker]

I first came to BP about 3 months ago and have become an ADDICT.  Forums, blogs, podcasts...I can't get enough!  My wife calls BP my "other" wife.

I have three duplexes under contract that I'm very excited about. The first one just got inspected and I'm waiting on an appraisal. I was hoping to get some perspective from the more seasoned guys on my deal. I'm buying in an LLC since I have a partner. The property was remodeled down to the studs 9 years ago. Inspector said it's one of the nicest duplexes that he's inspected in the last several years. A couple little things that we'll need to fix, but nothing that we're even going to ask for from the sellers.

I'm 35, with a solid income stream, so I'm using 15-year amortizations on all the properties.  I can keep adding in my own cash flow to continue buying, and I want the properties to be paid off when I'm 50-55.

Here's the nuts and bolts:

Purchase Price -- $144K (Sellers paying closing)

10% Down Payment -- $14.5K (4.5% 5-year fixed, 15-year amortization)

Rent -- $1650/mo. (both units currently rented by very nice people who live very close to work and really like the place)

Mortgage -- ($991/mo.)

5% Vacancy -- ($80/mo.)

Actual Property Taxes -- ($240/mo.)

Actual Landlord Insurance -- ($60/mo.)

4% Property Management -- ($66/mo.)  (Actual %, friend is a realtor/manager, gives me a great rate on properties I buy through him if they're in a good area)

10% Maintenance/Repairs -- ($165/mo.)

NOI -- $12.4K

Cash Flow -- ~$40/mo.

COC -- 3.5%

Cap Rate -- 8.6%

Total ROI (Including Principal Paydown) -- 45% in first year (goes up in subsequent years with additional principal pay down)

I think I did well for a first buy.  Agree/disagree?  Only thing I think I may not be adequately budgeting for is maintenance/repairs?  Would love some feedback from some experienced investors!  Thank you!

[Andrew Banker]

@Michael Faulk, thanks for reminding me about the meeting.  The three duplexes that I mentioned are in the Milwaukee area.  I can't find anything locally where the numbers look anywhere near as good.  I'd love to discuss my evaluation metrics to see what you think about them.  I'll do my best to make the meeting!

Based on what you see in that first post -- any thoughts?

@Tony Velez, thanks for the thumbs up.  I went through my calculations again and again.  Felt like I've left myself room that if they don't end up being as great as I expect, that I can't get hurt too badly on them.