Help on my first potential deal!

[Trevor Shakiba]

Newbie here, would love everyone's input!

Built in 2006, Duplex, each unit is approx 1,600 square feet.

Both units already rented. One is Section 8 at $1,200 per month. The other is $1,150 per month.

$167,500 Sales price, I think I can get it for $160k. So, here are my numbers. Please tell me what I'm missing and why this is not a slam dunk. It certainly appears that way to me!

$160k (Purchase price)

-$40k (25% Down payment)

=$120k

Monthly note: $644 (30 years at 5%)

Projected rent: $2,350

$2,350*50% = $1,175

$1,175 - $644 = $531 cash flow

Thanks everyone!

[Sharon Tzib]

Eric, cap rates are a metric to compare one commercial deal to another in a certain area to see if you are getting a good deal or not. It is generally reserved for the 5 unit and above deals. 4 unit and below are generally valued by "closed" area comps (an appraiser will not be able to use a pending sale).

Having said that, I think this is a great deal. Great cash-on-cash, ROI, and a Section 8 tenant to boot (I'm a fan of those). If you haven't already, pull the trigger.

Cross the appraisal bridge when you get to it (seller may have to lower their price and/or you could bring more cash to the table or a combo of the two-but make sure the numbers still make sense). Keep us posted and good luck!

Sharon