Duplex analysis - San Diego area

[John Hostetler]

Hello all,

I am new to the forum and have learned a ton from all of the great articles and forum discussions. At least I THINK I've learned a lot. Let's see...

To this point I have been concentrating on buy & hold condo properties, despite the potential HOA nightmares. There are still a few that I am considering, but today I started expanding my searches to include multi-family and this popped up:

There's a duplex built in 1958, asking price is $175K. Both units are 2/1's and about 810sf in a decent, not great area of east San Diego county. The current vacancy rate, pulled from various local articles, is hovering below 3.5%. With rental comps from rentometer, trulia, and craigslist, I come up with $1,100 per unit, conservatively. Using the 50% rule, I come up with net rents of $13,200 and a cap rate of 7.3%.

My plan would be to offer $160K and obtain 75% financing at 4.75%, with 5.5% up front financing costs (points, closing costs). This, from my calcs, would result in an annual P&I of $7,296, cash flow of $5,904, and ROI of 10%.

Most of the condos and other multi-family properties I have evaluated have been tough to get to my 7.5% ROI goal. Other than the obvious issue of serious deferred maintenance, am I missing anything on my analysis?

1) Any thoughts on what else to look for?

2) Is my analysis sound and a ROI of 10% considered "good." (I sure would be happy with it when compared to my stock investments over the past decade or so.)

Thanks in advance for any feedback!

John

[Mitch Kronowit]

Originally posted by John Hostetler:

The consensus from that small sample is that in a market like San Diego, almost ANY positive cash flow is a positive, given the potential for appreciation over most other markets.

Good for you John! Cash flow isn't everything unless your livelihood depends on it. We have a condo in Scripps Ranch and whatever cash flow we ever made on it pales in comparison to the appreciation we've experienced.

Finding properties in SoCal that meet the 50% "rule" are hard to come by unless you shake hands on a mouth-watering deal or buy somewhere in gang-land. But, as I've said in a another thread, I believe it's cheaper to maintain property in SoCal than in other places. We don't have harsh winters, wet humid conditions, or basements to contend with. Our exterior paint jobs last a long time, as do our roofs, heaters, and A/C's. The way I see it, we're making money, long-term, in appreciation. Any positive cash-flow is the icing on the cake.

Which area exactly are you talking about here? El Cajon, Santee, La Mesa...? I had my eye on a condo in La Mesa, about 2 miles east of SDSU. It's probably gone now, but I would love to acquire more properties in San Diego.