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Updated about 7 years ago on . Most recent reply
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Duplexe deal analysis advice
Property details: Duplex on corner lot with nice views. Each unit is 2 bed,1 bath. They are both identical layouts . It is on a block with with about 7 other identical buildings. This one is one of the crappiest shape.
Slab on grade with open beam construction.
Gas furnace, electric water heater. City utilities
Price: $195,000
Taxes: $1778/year
Insurance : estimated $50/month
Down payment: 25% = $48750
Rehab costs: $5000- new floor, paint, couple windows
Loan amount : $146,250+$5000 for closing costs= $151,250
Interest: estimated 4.5%
30 year fixed
Monthly payment principal and interest: $766.36
Total monthly payment with taxes and insurance: $964.52
Income: unit #1 $725 , unit #2 $895- unit 1 is lower because owner hasn't raised rent to a 10 year tenant. I don't know why.
Income total: 19,440/year
Expenses: garbage : $20/month, sewer: $46/ month, water: $84.06/month
expense total: $150/month. $1800/year.
Note: im sure there is more expenses for example grounds keeping. I just don't have the exact details yet.
NOI: $17,640/year
Cash flow: $6065.76/year
Cap rate: 9%- could be more if rent is raised
Coc: 11.8% ( includes rehab, down payment only)
Total ROI:
Property appreciation- 2%/ year= $3,900
Equity:$2440 1st year
Cash flow : $6065.76
Total: $12526.76
Total ROI : about 25.6%- this is with no taxes involved
This is a deal me and my sister would be going in on. I am new to real estate investing , she already has some duplexes as investment. I feel like the property has lots of potential. It is a booming market around here. The place currently looks trashy due to the tenants but there is another duplex right by it that's looks awesome.
I think the plan would be to buy them, kick out the tenants, give it a minor face lift and get new tenants with better habits and make the rent $900 each one.
What you guys think?
Most Popular Reply
Double Check your numbers. I ran the numbers and i am getting about a 7% Cap and 9% CoC with 5390 Annual cash flow which is $400 bellow yours.
That being said
Looking at your explanation it looks like you did not take in to account Vacancy, Maintenance, CapEx, and Property Management. In my opinion Vacancy, Maintenance, and CapEx are a MUST when analyzing a property. People can make the argument that they will manage themselves and not include it, however i would not buy a property that does not cash flow well while paying a management company. If self manage that's just a bonus to you.
Once you include these factors the deal looks very different (Vacancy 5%, Maintenance 5%, CapEx 5%, and PM 10%). Cap 5%, CoC 2.7% and Annual cash flow $1607 which is less that $100/month per door.
If you were able to get the other unit up to $895 it gets better. Cap 5.85%, CoC 5.28%, Annual Cash Flow $3147.
To me it seems like a low CoC return.