1/2 of a Duplex in Tulsa - Deal or No Deal?

[Ryan Faber]

I'm lookiong to get some more seasoned eyes on my analysis and feedback on points I may be missing or assumptions that may be off. This is my first investment property. The property is one side (half) of a duplex in Tulsa, Ok. It's a bank owned property and was an owner-occupied foreclosure. Most duplexes I've seen aren't owned separately, so that is interesting to me...

Here are the details:

1156 sq ft

2 bed/2 bath

Purchase price ~71,000 including closing costs

Needs $7-9,000 to get it rent ready, so we'll round up to an all in price of ~$80,000. 

ARV ~$100,000 (I wonder about this as I imagine the demand isn't super high for half of a duplex...thoughts?)

The other side of the duplex is rented out for $800/month and I think this would be right around that price. Could probably get $850.

Assumptions:

Insurance $600 (I have a couple quotes at this number)

Leasing fee $595 (have a quote for this)

Management fee 10% monthly rent

Repairs 5% of PGI

CapEx 5% of PGI

Taxes $1,027 (last year)

Analysis

I've analyzed the deal with an all cash purchase and I would be looking at returns of about 6.8% CoC before tax and 5.5% CoC after tax.

However, if I were to finance the deal after repairs at 5% with a 75% LTV (i.e. pull out 75,000 of the 80,000 I put into it), my returns would bump up from a % standpoint, but the monthly CF would be pretty small (although at that point I would only have $5k invested).

What am I missing? What's the general thoughts out there on if this deal is worth it?

(keywords: Tulsa Broken Arrow Owasso Oklahoma duplex)

[Jaysen Medhurst]

@Ryan Faber, I don't think this deal is worth it. Your projected expenses are a little low and with financing you're going to be below $50/month. Most investors like at least $150/month/door.

End of the day this doesn't even hit the 1% rule, so it's hard to make the numbers work.