Memphis Duplex Analysis - Is this a good deal?

[Joseph S.]

Hi All,

I have a potential deal in Memphis, TN for a long-term buy and hold duplex (3 bed, 2 bath each side) that I'm a bit torn on (running into some paralysis analysis) and would love your thoughts! I tried to include all the pertinent information below:

Rental Income: $13,200

Rent: Currently has a tenant on one side at $550 per month without a lease – I’ve made it a condition of the sale that the tenant has either signed a new lease with my property management company or delivers that side vacant; other side is not rented out due to required rent ready repairs; rental comps in the area show between $550-600 (I’m being conservative and assuming $550).

Expenses:

Vacancy: 10% ($1,320)

Property Management: 10% of gross rents ($1,188)

Property Taxes: $2,065 ($905 for City of Memphis, $1,160 for Shelby County)

Property Insurance: $450 per year

Repairs and Maintenance Assumption: 2% of Property Value per year ($980 per year)

Utilities: separately metered; all paid by tenant except for lawn mowing at $25 once a month for $300

Advertising: 6% (roughly ½ of first month’s rent) $792 per year

Debt Service: Based on $49k purchase + repair price, 20% ($9.8k) down, 5% 30 year fixed is $2,525 per year

Location:

This is probably where most of my concern is coming from: Western edge of Hickory Hill, Memphis, 38115; major cross streets: just SW of Clarke Rd and Winchester Rd

Acquisition:

Purchase Price: $42k, seller to pay closing costs

Repairs: $7.5k

Total Acquisition Cost: $49.5k

ARV: Large range of comps in the area, best guess is $60k

Financial Metrics:

Net Operating Income: $6,105

Cap Rate: 12.33%

Cash Flow: $3,580 per year, $298.33 per month, $149.17 per unit per month

Cash-on-Cash Return: 36.5%

Do you think it's a good deal? What's a good price for this duplex?