2-Family with below-market rents, thoughts on this deal?

[Matt Harp]

A 2-family in a C+/B- neighborhood, listed at $81,000. Both units are 2 bed, 1 bath rented out at $550 ea.

Assuming 8% vacancy, 10% CapEx and 5% ongoing maintenance/repairs, I have cashflow at $110 per month. Not a worthwhile deal, less than 6% cash-on-cash return.

But... Zillow estimates rents at $850/month for the property, which is well above what the current owner is getting. How much stock do you all put in Zillow rent estimates, and would you factor the ability to raise rents into whether you considered a deal worth pursuing? Raising rents to $700, same assumptions everywhere else, puts the cash-on-cash return above 12% with $220/month free cashflow.

[Juan Reyes]

i would google real estate agents in the area and call to see what price range rentals are going for in the area. Maybe pretend to be a potential renter yourself, although I like to think most agents would give you an honest answer either way.