Duplex in Northwest Indiana

[Account Closed]

Hi BP Nation

I invest remotely in NWI, and live in CA. 

I'm looking at an off market duplex in Hammond Indiana. The asset class is not exactly what I was looking for, I would probably call it a C (although I know this rating system is a completely arbitrary measure of risk). The nearest cross streets are Calumet and Sibley. I've been advised by a couple of professionals out there that its not the best area and not terrible either. Looks a bit rough on G-maps.

Here's the bit of info I have right now. Updates to come as my contractors give me a video walkthrough later this week.

Purchase Price: 55,000

Each Unit: 3 bed 1 bath. 

Condition: Roof, windows, furnace, ac, water heater brand new within 5 years.

Rehab: 10-15k cosmetics

Combined Rent: 1600 (800/unit) this is conservative. 850 realistic w/ good finish quality.

ARV: 80k (conservative)

I don't think there's much wrong with the deal from a cash flow perspective. After a fresh rehab, with durable materials put into the house, and a manager referred to me by other investors in the area.. I'm writing the pro forma @...

8% mgmt, 12.5% maint/repair/capex, 7.5% vacancy: 450$

Prop Tax & Ins: 200$/mo.

Mortgage (if i refi w/ 60k loan @ 5%int): 330$/mo

Sewer/Water/Garbage (although tenant will likely pay): $120/mo

CASH FLOW FINANCED: 500/mo... ROE: 30%

CASH FLOW FREE & CLEAR: 830/mo... ROE: 12.5%

Please please please pick apart anything and everything I have posted about this deal above. I feel like I'm being rather fair with my estimates and it looks like the returns would justify adding a little risk regarding the tenant class. 

Honest opinions?

[Adrien C.]

Is it a side by side duplex or top/bottom? I would confirm with city inspection department that it is a legal 2 unit. They are notorious for converting illegal duplexes even if it's been that way for 40yrs. The assessors site also will classify it as a 520 property if it is a 2 unit (510 for SF) but I would still check with Hammond. I would agree it's a C area- south is a much better area. The taxes/insurance seem low. I'm looking at a property assessed at $60K and taxes are $2,000. $10-15K isn't much rehab for 2 units. It should probably be in decent shape if that's your expectation. Make sure you used licensed city contractors and register the units as rentals before you rent them out. And most of the PM companies here are 10% plus 50-75% of first month which bumps annual % some. Even if those numbers are all bumped up, you should be cash flowing well with an ROI over 10%. Feel free to give me a call if you need someone local to discuss the real with and check out area.