Analyzing my next deal

[Joe Doman]

I have a potential off market deal lined up in result of a small direct mail campaign. The property is a duplex in a good community with a decent job market, schools, etc. I actually own a duplex in the same city and it is performing very well and I have awesome tenants. The one odd thing, unlike the one I own, this duplex is on a dirt road. I am not sure how that impacts price, rent and tenant quality. -and of course there are no good comps in this area.

So I am trusting my cash on cash return calculation to make sure the price makes sense

Here are the numbers:

180,000 Purchase Price - 45,000 Down - Loan 135,000 - 4.5% - 30 Yr Term 

685 mtg

390 taxes

100 ins

1,175 PITI monthly

425 in Expenses. --- 230 cap ex; 80 in vacancy; 115 all other exp. (any advise on this is appreciated. Tenants pay all utilities, they also take care of lawn and snow. )

1,600 total monthly cost

5,000 in initial repairs. The property seems to be in great shape (I have not inspected it yet) roof and siding are newer, one furnace is older but all else seems to be in good working order.

1,850 is current rent. One side is renting for 1,000 and the other is 850. I think market rent is 1,100 ballpark.

I figured the cash investment will be 56,000 after down payment, closing, repairs.

with 250 in monthly cash flow, that yields a meager 5.3% cash on cash return. (I like to use 10% as a bench mark)

BUT the tenants lease ends by the end of the year. I think I can get 1,100 each side (conservatively) which will get me to 585 monthly cash flow which is 12.4% return on cash.

I would love to here from the community... What are your thoughts??? THANKS!

-Joe