Victorian Duplex Deal Analysis

[Charlie Anne]

I have found a duplex I'm considering making an offer on. I'd like some advice on my deal analysis - am I missing anything?

It's a 1910 victorian style home with new HVACs in each unit, new windows & new floors. I'm unclear on the condition of the roof, pipes & electrical at the moment, but building in 10% for capex & 10% for repairs.

Listing Price: $128,000

Rent Income: $1,290

Costs

• Mortgage: $520
• Insurance: $75
  
• Property Manager: $90
  
• Vacancy 8%: 103
  
• Capex 10%: $130
  
• Repairs 10%: $130
  
• Property Taxes: $30
• Water/Sewer: $60
  
• Lawn Care: Tenants
  
• Garbage: Tenants
  
• Total Costs: $1,138
• Estimated Cashflow: $152

This is low cashflow for a duplex, but I'm considering it for 2 reasons:

1) The market is appreciating at 8% YoY

2) I think rent can be raised by $100 on each side. If that's the case in 1 year it could be cash flowing for $352 which is closer to the $200 per door goal. Additionally, water costs could be transferred to the tenants as well for a total cashflow of $152 + $200 + $60 = $412.

What I like about this duplex:

• In the up & coming part of town
• Rent ready with 2 tenants in place
• Very cheap property taxes
• High appreciation 

What I don't like about this duplex:

• It's from 1910 which worries me regarding repairs
• It's by a river (but not in the flood zone)
• The neighborhood has some nice homes & some run down homes

I'd appreciate any input! 

[Ric Ernst]

@Charlie Anne you didn't mention where this property is but $360 annual property taxes on an investor owned $128,000 property doesn't sound right. Any 110 year old property is going to be super expensive to fix and maintain and that low purchase price and the low rents suggest it isn't exactly in great shape. I think many of us would fantasize about living in a beautifully restored Victorian but I wouldn't consider this a good investment from a rental perspective and banking on appreciation might not be a great move unless you know exactly what sort of shape it is in to begin with a higher maintenance budget.