My First Deal: A Duplex

[Chris V.]

Hey folks, well I think (hope) I finally found one that will work for our first deal. We are still in negotiations, and I could use any suggestions you fine folks would have. Couple top-of-mind questions I have:

1. Does this look like a good deal?

2. We aren't using RE agents, any trustworthy contract templates I can use? Any advice here?

3. Who should pay closing costs? What's typical today?

4. He was asking $75K, and I said I'd rather be at $70K, but that was before any inspections or anything else... and before we agreed to not do agents. I'm considering making an official offer of $65K with the fact that we won't be using agents AND he indicated he wanted to sell as-is.

5. Any help on the process including inspections needed, I'd greatly appreciate! I plan to line up a termite, home, and HVAC inspections.

6. What else should I consider? Thanks!!

Here are the details:

Current Price: $70,000 (still in negotiation)

Property Taxes: $2,613

2 units, both 2bed/2bath

New carpet, roof is 2 years old, heat pump is "fairly new" (i need to check this out), floors look ok, and the units seemed to be in decent condition when I visited today.

Rents: $600 per unit, both rented with one under lease, the other month-to-month

Insurance: He said he pays $1300/year for insurance so I used the same.

Loan Interest Rate: I simply could not find anything reliable to say what my rate would be. I need to talk with my lender tomorrow, but I am estimating 4.75% with no points on a 30yr fixed, conventional loan. My credit score is 800, and I have no debt. No clue what interest rate will end up at.

Closing Costs: Who pays those typically? I estimated $2,000.

Here's the screenshot of the Rental Property tool:

We did walk through the property today, and it really does look nice inside.

The left unit was well kept, smelled great, no issues. 

The right unit, the tenant has a cat and two dogs (not supposed to have pets, and he knows it), one of the bedrooms smelled distinctly like cat urine. There is also a few water spots over the kitchen ceiling which the owner said he'd have that fixed this week, assumed it was something to do with the HVAC drip pan or something. Also, the tenant didn't want us to go in the master bed/bath because he said his girl was back there and it wasn't clean. So no clue what's up back there, and should I require that I can walk that area first?

[Christopher J Lemmon]

Chris V. I would not walk away. Don't be scared of making money. Every deal has its challenges. It's smart to negotiate hard. Kudos to you for doing that. But I would not let this deal get away for a few thousand bucks there is cash-flow in it! Also, one bad tenant is not a reason to walk. If you are in it for the long run, you will need to get skilled at selecting, managing and negotiating with tenants. You could be leaving a perfectly good deal if you walk. If you have one good tenant you can cover the mortgage until you deal with the less than ideal guy.
The numbers look good to me.
If you do a thorough inspection you will know what the incoming repairs are on your property will be. That's mostly what you need. If you have priced all the other costs, your good!
I have found here on BP, there are a lot of deal spoilers trashing new investors deals when they float them on here. Some guys are so critical they never see a deal they like. There is room in this deal to get started. You have to start some where and you learn a lot jumping in on a deal and finding a way to make it work. A few months back, I looked at a few of the guys tearing my deal up on here, several of them did not even own one rental unit yet they jump in and try to tell me my deal sucks and I am an idiot for thinking it's good. You know this deal better than any other guy on here trying to comment. If it looks good and you have done due diligence go for it!
The negative guys are like the opposite of a get rich quick guru. Don't let them burst your bubble. Your own the right track. This scenario is very close to one I just bought price wise and rent wise. And it's working out just fine for me, irregardless of the naysayers.