First Time Investor (Property Analysis)

[Troy Studer]

Hello,

I am a first-time investor looking to buy a local Duplex.

The home is posted at a listing price of 134,000. As is, the home can rent conservatively for $900 per unit. The property requires no major CapEx in the short term. The home could use some minor cosmetic updates, which would likely fetch a higher rent price. Given the numbers on the spreadsheet attached below. Does anyone have a suggestion on what sort of cash flow or ROI to make my first and final offers based on?

I know this likely has everything to do with local market and what other deals are available to me. I also can apply a lot of the generic rules of thumb like the 20% Rule, 50% Rule, 2% Rule. I'm looking for further insight from some experienced investors. I am attempting to be as objective about this investment as possible.

Any and all input is much appreciated!

-Sincerely Troy

[Brenden Mitchum]

Hey @Troy Studer, welcome to the BP community!

Well, it definitely meets the 1% rule all day. But for a moment forget about all those rules. They just help you get a ballpark, back of the napkin, idea of whether or not the deal calls for a more in-depth analysis. Since you're already doing an in-depth analysis here, they are no longer necessary. 

So now let's talk returns. You should have your own idea of what you want from CoC and cash flow. Every one has their numbers and they're usually a combination of what they've heard more experience investors want and what they themselves want. That's what mine are, at least. So do a little research on this and ask yourself what kind of returns you want to get on your money.

Now, the numbers in the deal itself. My first concern is that I see no repairs and maintenance. Depending on the age and condition of the property this could be anywhere from 5-10%. I do not see anything in there for property management so I assume you are self-managing. If not, throw a 10% in here until you get a number from your PM. I don't see any lender points but it does appear you have spoken with a lender already so are they just not charging you any points at all? Lastly, will you be paying some of the property's utilities? If so, I'd just make sure to double check those numbers with what the current owner pays.

With a 15 yr loan, it will be tough for you to cash flow. Even at $14k off the purchase price its a bit narrow of a deal. However, if you can make it happen you're going to build equity much faster so this trade-off will be your call.

Hope this helped a bit. Please, feel free to message me anytime if you have questions or just want to chat!