Duplex for $89900

[Rob Jones]

Hi Everyone,

I have been presented with an off-market deal by my realtor and I wanted to get everyone's input. 

Deal is below:

Solid Brick Duplex built in 1977

2 Bed/1 Bath per side

Currently rented on 1 side to the same tenant for 4 years at $500...not sure if they are month to month or yearly

Other side is recently vacant but was rented to same person for 8 years at $500

Will probably need a new roof in approximately 10 years

Will need new water heaters in less than 3 years

Asking price is $89,900.  This price includes new cabinets, counter-tops in kitchen and bath, stove, possibly fridge, paint throughout, new carpet and vinyl in side A(the vacant side).  Side B(the occupied side) was redone 4 years ago prior to the new tenant.

Once the new side is overhauled I am 100% positive I could place a tenant for $600 per month generating $1,100 per month in gross income.  The thing I am really worried about right now is the appraisal.  There aren't many comps to pull from and not more than 4 months ago a similar duplex(exact same floor plan and build year) that is a stone's throw away sold for $70k.  If the seller is firm at $89.9k I am highly doubtful that this one will appraise at that price or even close.  If this happens I won't be able to get financing.  To be quite honest I am comfortable paying the $89.9k because the numbers still work at that price but I would hate for a cash buyer to drop in and steal this because I cannot secure the financing.  Also, seeing that it is off market and has yet to be listed, I'm uncertain the seller would even entertain an offer in the $70k range right now.

@Jerry Padilla I will be talking to you about this one.  What are your thoughts?  Any additional input from anyone as to how I can make this work, thoughts, questions, concerns, etc. would be great!  Thanks in advance for the responses.

[Matthew Augustine]

A couple of things jump out at me here. One, couple of major expense items are coming up - typically I wouldn't say a water heater is too major, but at the low rent value you're speaking of eating up at least a few months rent relatively soon, and that's the best case scenario.  Roof is fine, if that's all there is no big deal.

Two, a quick glance and your general tone seems to indicate the duplex is a little too pricey/overvalued despite you still willing to meet the sellers numbers. If you're worried about the appraisal in tandem with not thinking the seller will negotiate, that's an issue. Don't get emotionally attached.

Third, assuming you can fill the vacant unit etc - and I've read this a couple of times just to make sure - you're getting a free renovation in the vacant unit? I just want to make sure you're not physically putting any money into it. I only say that because it would take a long time to recoup any monetary investment if said investment only generated $100 a month extra in rent. (Unless you're going for forced appreciation, but that doesn't seem to be your goal)

Only you can know if the numbers work for you. To me, with a vacant unit, upcoming major expense items, potential fail on the appraisal , little to no room for negotiation - it seems the margins would be very thin and you may end up overpaying. Not in love with it from what little I see.