Duplex Portland Maine

[Lisa Sessions]

Hi looking at a duplex in Portland near rosemont neighborhood List: $320,000 Rents:$1200/unit Tenant pays all utilities, plowing and lawn care Fully rented Good condition but in future 5+ years will need a roof Taxes: $4300/year Vacancy rate is 5% for the Portland Area I'm thinking of offering $300k, I'll put 20% down (or partner if needed) My analysis $240 month for Maint/cap ex $1618 PITI $120 vacancy If I manage myself I'll cash flow $422 or $211/unit Or: $192 (8% property management) I'll cash flow $224 or $115 if managed by a professional What am I missing? I don't have all of the $60k so that's the next step... Another question how much do you keep in reserves for a place like a duplex?

[Edmund Ricker]

@Lisa Sessions

Good for you for looking for deals and trying to make it happen.  I would avoid Portland because I don't like the politics of the town and how they seem to be very landlord unfriendly.  However, if the deal makes sense to you and you are happy with it, go for it.

I think you might be a bit light on your expense estimates.  Generally many investors figure 10% each for cap ex and maintenance.  It appears you have combined them both at 10%.

Also, what assumptions are you using for the mortgage? I ballparked a calculation and came up with a monthly mortgage payment (PITI) that was higher than yours.

If you use more conservative estimates, it appears that this property would not cash flow very well.  However, I am not sure what your objectives for the property are.

As far as reserves go, I would keep enough to cover a major system replacement.  You mentioned a roof in 5+ years and that will probably run 10k or more (without seeing the property and knowing how many squares of roofing).  In general, keep more than you think you need, so when Murphy pounds on the door, you are ready.

To make this property cash flow, maybe you could offer less.  Portland seems to be pretty hot so if the property is priced well it should move and if it is sitting, there is a reason.

I am not trying to squash your enthusiasm, but being conservative with your numbers could help you avoid a deal that will not work out well.  No one wants to see another investor get into a bad deal.

Hope this helps.

Ed