Looking for feedback on next deal

[Jason Woodson]

Hey BP fam! I'm in Keene New Hampshire and finishing up a BRRR investment that has gone really well. I'm currently looking at a deal and thinking about putting about 60% of my currently available capital up for it and wanted to get some feedback. Hoping I can get the price down a bit but it's been on the market for over a year and fell out of contract twice, FSBO, and the listed price has only dropped 5k. Im focusing only on buy and hold at this time so the ARV isn't super important to me (in fact I'm ok keeping it down since the tax rate is ridiculous!). 2 story duplex, 2/1 on first floor, same on second 125,000 price 15,000 rehab needed (nothing immediate, but within 2-3 years, deck/exterior stairs, roof, junk garage, couple small floors, chimney/vent) 165,000 ARV 1800 total rents (900/900) 1200 all expenses (mortgage, insurance, taxes, vacancy, water/sewer) Pros: Turnkey. Centrally located, walk to downtown, two local colleges. Good floor plans. Basement laid out very well for all the split utility systems, easy to access and work on (a first for me!). Ample parking. Next to main bike path in town. Easily add third bedroom on second floor unit, 1500 cost, add ~150/month in rental income. Cons: No laundry in units. House to one side not falling apart but is a hot mess. Thanks all!!

[Matt Lefebvre]

Hi @Jason Woodson!  Just some initial thoughts based on what you posted:

1)  $15,000 rehab seems far too low for replacing a roof, a deck, some flooring, and dealing with a chimney (also noted that one side of the house is a "hot mess"... so don't know how much to budget in for that)

2)  You listed all expenses as $1200/mo including mortgage, insurance, taxes, vacancy, and water/sewer.  While those are some of the big expenses, you also need to be budgeting in a portion of your rents for R&M, a portion of your rents for upcoming capital expenditures, a portion of your rents for a management fee (because you're either paying someone else to manage your property, or you're paying yourself to manage your property), and whatever your vacancy factor is.  This means you should be factoring in at least 18% of your gross rent as "budgeted expenses" (5% management, 8% R&M, 5% CapEx) and perhaps even more if you're not self-managing.

3) $165,000 is a pretty high ARV considering the current list price and the length of time its been on the market. Not knowing how you arrived at that number, I'd be cautious of assuming this is the actual ARV of the property. If it takes that long to sell, I'd be wary and assume there's some large issue that's going to cost a lot of money, or the value might not be exactly what you think. Based on a $165K ARV, that's assuming a $82.5K/unit price which seems pretty high for a market like Keene.

Not trying to dissuade you from purchasing... but I always prefer to take a property and look at why it won't work instead of trying to play with the numbers until they do work.  Let me know if you find this helpful!