Possible first deal looking for advice

[Shane Brown]

Hello,

need some advice on a property that I am looking at. It is a duplex that is small, 1,100 sqft. Two one bedroom one bath apartments that need updating. It is going for 109,000 I want to try and get it for 90,000.

Monthly gross rent-$1650

Expenses 

Tax-264 a month

Water- 100 per month estimated

Heats-100 per month estimated 

insurance-100 per month estimated

vacancy-115.50 (7%)

Capex 82.50 (5%)

Repairs 148.50 (9%)

Management 165 (10%) 

P&I 386.51

Garbage 50 per month estimated

Total 1,511.68 

Monthly Cash flor 138.32

COC- 6.64%

Pro Forma cap rate-4.84%

purchase cap rate- 7%

2% rule 1.70

I don't know if the seller would accept 90,000 but its a smaller place needing updating and has been on the market for about 130 days. It also is on the close to the rougher part of town. This will be a buy and hold.

Thanks for any info and thoughts!

[Ken Breeze]

Research crime rate on Zillow or Trulia. You can lift a house or apartment complex but not the area.

Do your numbers and be VERY realistic. Make a "ridicloulus" offer and see what comes back.

How hard can it be to be your own PM and save the 10% for yourself until you buy a few more and outsource the job? Or have a handyman as a tenant and offer incentives.

Have residents pay for all utilities. This increases your NOI immensly. They will suddenly pay 40% less by changing their behaviour real fast. This also changes mindset. It ebgages and makes for a more resonsible resident.

What we believe, feel or think is irrelevant for the financials of a real estate business. Get sales and rent comps to stop the guess work and gain clarity. Let the numbers speak not your emotions.

Make sure your offer and LOI spell out favorable terms ofro you to have enough time to do your due dilligence in order to pull back or lower the price should a skeleton pop out of the closet ;-)

Send me a DM if you'd like to bounce off a few ideas. Cheers, Ken