First MFH/duplex in Durham NC. Math check.

[Joseph Torres]

After doing much reading here I'm going to be looking at a duplex near downtown Durham NC and it seems pretty promising. Here is the math: -Price = 100k -Rent = $1100 from both sides -Down payment= 25% & 4.8% interest -Tax= $1160 yearly -Insurance= $600 yearly -They pay utilities. Floor furnace, city water, city sewer, electric, etc. -No PM company as I live close and for the first one I want to be as involved as possible. No repairs needed at this time and so far 50% occupied. I will have to find a renter for the other side. At $550 a month for this nice little house I don't see that being a huge problem especially with it being close to downtown, colleges, etc. I have a cash flow of around 20% (give or take) if all goes as planned. Am I missing something completely here? I understand vacancies and repairs but I feel like I may be missing a key component. Or is that pure fear I'm feeling :)

[John Leavelle]

Howdy @Joseph Torres

First of all it never goes as planned.  There is almost always something unexpected that pops up.  You would be wise to stay on the conservative side verses the optimistic side when it comes to analyzing Cash Flow properties.

You are assuming $220 per month in Cash Flow. If that does not include Vacancy, CapEx, and Maintenance then you may be in for a shock. If you have only one month of Vacancy that's double your projected cash flow. If you need to replace a water heater there goes several more months of Cash Flow.

There are other miscellaneous expenses you are not accounting for that eat into your cash flow.  Things like legal fees, accounting, pest control, lawn care/snow removal, etc.

You should also include PM in your analysis even if you are going to self manage. Some day when you've grown your REI business you may need PM services. If you did not include it initially you may find there is very little Cash Flow at that time. Notice we've said include it in your analysis. That doesn't mean you will be paying it.

The property does still look like it is worth further investigation.  It meets the 1% rule for income and 50% rule for cash flow.  I just caution you to be more conservative.

Good luck.