My first deal

[Robert Niessen]

Hi BP, My wife and I are looking to take the plunge into the world of buy and hold real estate investing. Below are the particulars on the property that we currently have in mind. It is a duplex in a decent suburb outside of Philadelphia, Pa. We are planning to own the property through an LLC to be set up at time of purchase. As for financing, we’re using a HELOC on our home for the 20% down payment and I’ve assumed a 20 year loan at 3.5%. Am I in the ballpark? Asking price is $197,900, I’ve assumed that we could buy it for $192,000 based on our agent’s conversation with the listing agent. I figure we’ll put in another $2,000-$3,600 in improvements. Rents: $2,350 per month Top Unit: rented through August 2017 at $1,250 per month (prepaid = no worry about collecting) Bottom Unit: assume it can be rented for $1,100 per month based on Trulia comps with a 2-car garage included and washer/dryer Monthly Expenses: $650 per month $80 Water & Sewer $60 Trash $71 Insurance $200 Taxes $98 Allowance for vacancy $141 Allowance for maintenance Electricity and heat are separate and covered by tenants. Monthly Mortgage Payment: $891 per month Assumes 20 year mortgage at 3.5% with 20% down payment With both units rented, I figure we’ll get just over $800 per month in free cash flow after setting aside money for vacancy and maintenance. It feels like a screaming deal, but am I missing anything? Other considerations on a first purchase? Thanks in advance for the collective BP wisdom! Rob