I am about to complete my 3rd deal, thoughts?

[Michael Seutin]

I got this duplex near dallas. Cost me $135.500, tenants are already placed and total rents are $1775 a month. I have seen the property and the tenants, property looks great, tenants take good care of it.
I am putting 25% down payment, so I will cash flow pretty good, probablay over $500 a month even after some maintenance.
Now I know it doesn't fit the 2% rule but none of the properties in dallas fort worth did (not the ones I have seen).
Do you guys agree with me that this is a good buy ?

[Tom NA]

You asked for 'thoughts', I'll summarize a few:

o Just because you haven't experienced 50% expenses doesn't make that concept invalid. Remember, this number comes from the law of averages - over several years and several properties. You may be lucky enough to have a property that runs at 25% for the next 10 years or you may be unlucky and run at 85% over the next 10 years and you cannot predict what will happen. You have no idea if your roof will start leaking, 4 tenants will need to be evicted, or someone will injure themselves and sue you. My limited experience has been most years are well under the 50% average but then there are a few years where 50% would have looked great!

o You're using the 'reality' of the best deal that you can find in DFW to rationalize an investment. For some reason, you've already decided that investing in the DFW area *must* be a good thing. That's like saying "I've predetermined that I'm going to invest in an auto company and Ford is the best I can find so I'll put my money there." That doesn't make it a good investment.

o Depending on your market, don't bank on rent increases. My oldest property commands the same rent today as 5 years ago and if that tenant moves out, I would be surprised if I could get someone else to pay me that rate.

o I haven't looked lately so I don't really know what's available but can you really get 6% financing on a NOO property?

o As others have pointed out, your deal isn't the worst and you should generate a little cash flow from it. However, if your desire is to get to the point where the forum agrees that you got a 'good' deal so you feel better about what you've done, I just don't think it's going to happen. Some of the experts have given their opinions and there is really no additional information you can add that will change the professionals' assessment of the deal.

Good luck.