4% Rule Duplex!! Tons of equity!! Yea, I know!!

[Adam Scheetz]

Here are the numbers and Data:

• 1918 Duplex
• 6 Bed/2 Baths
• 2,281 sq.ft
• Banks Asking Price: $99,000
• My Offering Price: $75,000
• Estimated Rehab: $50,000
• Estimated Closing Cost: $3,000
• ARV: $220,000 (Conservative Estimate by multiple local agents)
• Estimated Rent (Conservative): $3,000; (Realistically $3200-3700)
• Verified Property Tax: $7,330/ann; $610/mth
• Verified Vacant Policy Insurance: $219/mth
• Verified Occupied Policy Insurance: $260/mth
• Flood Insurance: +$250/mth (Needs Elevation Cert: $350)
• NJ Landlord Fee: <$25/mth
• 20% Down @ 5% Interest: $715/mth
• CAP-X: 5%
• Repairs and Mx: 5%
• Vacancy: 5%
• Property Management: 8%

Okay, now the talking part. This duplex is in a quiet, clean, coastal town. Very low crime rates (No violent crimes), decent schools, people still walk around and ride their bikes. The neighborhood is middle-income/blue collar. No gang activity. No derelict properties.

I'll show you the results based on the banks asking price and the offer price.

Banks Asking price results:

• Net monthly cash flow: $442
• Year 1 Cash ROI: 7.47%
• Year 1 NOI: $13,884
• IRR: 17.52%
• CAP RATE: 15.43%
• 2% Rule: Actually it's the 3.3% rule.

My Offer Price results:

• Net Monthly Cash Flow: $442
• Year 1 Cash ROI: 7.80%
• Year 1 NOI: $13,844
• IRR: 18.6%
• CAP RATE: 18.51%
• 2% Rule: Actually it's the 4% rule.

Okay, when I first started crunching these numbers and seeing all the positive trends, huge returns, and crazy equity, I started saying what you are right now. "No way, there's something wrong, when things seem to good they usually are." So I started double and triple checking things. I called multiple insurance agencies to get accurate quotes. I ran multiple scenarios at different interest rates, lower rents, higher CAP-X, etc, and the spread still kept looking good. So, after talking at length with multiple real estate agents, insurance agents, and a local investor/general contractor who will be performing the rehab. This property seems like a great oppetunity.