Feedback on This Deal

[Sean Autry]

I submitted an LOI to buy 2 duplexes in Hesperia, CA. I don't like the purchase price, but the seller has agreed to carry a portion of it so I am not out of pocket any cash. Apologies if this is lengthy or complicated, tried to get all of the details in as concisely as possible.

Please poke holes in this!

Here are the details:

-2 Identical duplexes @$310k each

-Each has (1x) 3bd/2ba w/2car garage & (1x) 2bd/1ba w/ 1 car garage

-Each 2bd/1ba’s has a bonus room that can be converted to a 3rd bedroom

- the duplex units are separated by their garages (in the middle)

-Currently rented on month to month leases way below market.

-asked for seller carry of $165k @ 2.5% IO, 30yr amort with 5yr balloon

My plan is to:

-convert the 2/1’s to 3/1’s

-raise rents to $1,350 for each 3bd ($5,200 total)

-combine existing single car and 2 car garages and convert them to a 1bd/1ba in each property, turning each duplex to a triplex

-rent the new 1/1’s for $650 each, bringing total rents to $6,500

My assumptions:

-3 bedrooms will rent for $1,350 in zip 92345

-cost to convert bonus rooms to bedrooms = $2,500 each ($5k total)

-cost to combine and convert garages to 1bd/1ba $30k each ($60k total)

[Theresa Harris]

Check out if zoning prevents you from converting a duplex to a legal triplex and what the costs are to do that.  Losing the garage will affect the value of the rent.