Duplex Question- Almost Break-even Cash Flow

[Brett Baginski]

Hello all.  There is a property that I want to look at that has been under contract and back on the market twice already, listed at $265,000.  It is in an improving area, right next to the waterfront and downtown, and great for commuting purposes near major highways.  I spent a night in the town a few weeks ago and they had a live concert outside on a Thursday.  Great community feel.

The problem I am having is when I run my numbers with my HELOC payment, I am coming up with almost break-even cash flow, slightly negative. To me this says it is not a good deal, but my question is, what happens after a refinance in 6 months and I pay back majority or all of my HELOC? Will my cash flow look a lot better at that point? Maybe my numbers are wrong, I am trying to run them conservatively.

I attached my quick analysis below.  Thanks for reading!

[Robert Leonard]

Numbers look okay to me, and in short, yes, your cash flow figures would get better once you pay off your HELOC or the HELOC payment goes down. However, you're (122) right now and your HELOC payment is only 275, that means you'll only be in the black by 153, assuming you get it at the asking price. That's <4% CoCROI (assuming $0 closing costs) - not attractive.

Even at $235k purchase price, CoCROI is <8% (again, assuming $0 closing costs) - that isn't attractive either.

On top of that all, I don't see taxes or insurance included in your analysis. If they're included in "mortgage" then that's fine and what I said previously still applies, but if those figures aren't included, the outlook becomes even worse.

Robert Leonard