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Updated over 5 years ago,
Two duplexes on two adjacent properties, not a GREAT deal, but...
I am looking at two potential duplexes. I'm in a small town Texas with a moderate amount of appreciation, but stable retirement population and blue collar workers with steady (though slow) growth. There is a community college 1/8 mile from the property.
I care about investment return and long holds, not cash flow beyond the property self funding. My wife and I have high end stable jobs, so this is a tax and investment vehicle.
159000 for two duplexes and two properties. Which means two loans and two tax bills as well.
1st pass numbers with a too high mortgage (ran mortgage numbers for one building, they are selling two for two identical loans so just doubled) looks like the following:
Not a great cash on cash but looking at this as a value add.
Seller is willing to do 3% concessions which is loan max. So that cash out of pocket is actually a little high but I didn't factor that in for my quick spreadsheet.
A stabilized comparable one bedroom apartment in my area STARTS at 510 for a 1 bedroom at the one lowest end complex nearby and is 550-575 at all other complexes.
625-700 for cleaner complexes that are nicer than this property currently sits, but same location. Redo kitchen cabinets, bathroom fixtures, and vinyl plank throughout would put me in that realm but take a lot of investment.
The property has several tenants that have been there for years and need new leases and rents raised. Rent could easily be moved to 1945/month in current condition without vacancy problems. 2200 with new carpet and paint on walls in two of the units. One unit will need a bathroom floor cut out and completely redone from water damage to the subfloor.
Both duplexes are pier and beam. They have some saggy floor and cosmetic cracks in walls. I have foundation guys coming out to give me quotes to level the structures and confirm if there are any major problems. Just planning this as an expense because I will need a level foundation and subfloor if I want to address interior upgrades, so this can't be deferred if the plan is improve and raise rent.
Running estimated numbers on 5k per building to level them (not even sure that's totally needed yet) and putting rents to market rate gives me a 5.5% cash on cash.
Budgeting 5k per unit (again maybe too high but assuming I'm outsourcing a lot) and moving rents to market of $550 each puts me at a 7% cash on cash with two adjacent improved property on a desirable street in my area. Cash flow is $110/door in that setup.
This is not the greatest deal in the world. But my local supply is limited. So I'm still looking.
Foundation guys will see the property Friday so I can tighten up estimates.
Deal too thin or in the realm that you would consider it?