Duplex Analysis, what do you think?

[Amanda G.]

Duplex in C+ neighborhood that is not far from where some major white-collar industry is going to be soon-ish.

$65k price tag

Rents are currently $450/mo. That is low for the town, but maybe not for the area. One of the tenants has a year long lease, the other is month to month and would need 60 days notice to vacate. Tenants currently pay all utilities.

Needs about $15-20k in renovation, new windows, HVAC, water heater, lots of minor stuff and then all the cosmetic improvements

Tax $76/mo, with a 25% down loan at 4.75, the PI would be about $240

Thoughts?

[Derrick E.]

Originally posted by @Amanda G.:

Originally posted by @Derrick E.:

Originally posted by @Jay Helms:

How much of an uptick in rents will you see with the $15-20k in improvements?

Exactly what I was wondering, because so far I would say no. If the reno get the rents up to at least $600/month then you are talking. 

Aha! I just figured out how to tag previous comments. What numbers would make this work for you? Would you lay out the steps so those of us at home can follow along? Thank you, both.

You will be investing around $36,000 of your own money up front. 25% down of $65k and then another $20k in renovations.

$450/month each side is $900 month total or $10,800/year. Using 50% rule that gives you a profit of $5,400 year. 

$5,400/$36,000 is 15% which is good, but and it might even be great for that area. I personally don't want to put that much cash into something that is only bringing in 15% ROI unless I own the home 100% free and clear. This is just personal preference for me and my specific investing strategies.

$600/month each side gives you 20% ROI which is getting there for me.

NOW..... if you can get out of doing major renovations and keep the rent the same then those numbers look great to me.

$5,400/$16,250 (your 25% down) gives you a return of 33%. Those are the kind of numbers I like to see and look for.