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!