The Limits of Analyzing Properties On the Internet

It Never Hurts to Look

While reviewing properties that were going to be available for auction in our target market on Auction.com, I came across a couple homes that looked decent. They were in an area we have generally stayed away from, so I was surprised how good the exteriors looked. I did a quick search on Trulia to see what was for sale or had sold in the vicinity of those homes in the auction and came across this home:

Give Me the Stats

It is a duplex and is currently listed for $39,900. It has a 3 bedroom and a 2 bedroom unit with indicated rents of $585 and $480, respectively. I punched these numbers into Rentometer.com to see how those rents compare to others in the area.

From Rentometer.com

Your results are based on:

• 23 2-bedroom rentals
• ...in a 0.40 mile radius.
• Median rent: $600
• Average rent: $625
• 20th / 80th percentile: $575 / $675
• 10th / 90th percentile: $575 / $800

Your results are based on:

• 30 3-bedroom rentals
• ...in a 0.40 mile radius.
• Median rent: $812
• Average rent: $825
• 20th / 80th percentile: $725 / $900
• 10th / 90th percentile: $698 / $963

So the indicated rents look to be very low, at least according to Rentometer.

The Neighborhood

I did a little streetview tour using Googlemaps and the block looks pretty good. The other homes on the block look to be pretty similar and generally well maintained. All of the yards also look like they have been kept up. There were not a lot of people loitering around either (actually none to be exact). All good signs. The street is the first street just north of a major interstate and is thus separated from most of the rest of its neighborhood to the south. The neighborhood which this property is listed as being in is one we have avoided. It has a lot of vacant and run down properties and a higher crime rate than the areas we have chosen to target. In fact, our realtor had the following comment when I asked him about the area and property:

"That is a rough area but I will do more research on the property."

This is Interesting Because...

The seller purchased the duplex for $128,000 in 2003 and originally listed it for $99,900 in November 2013 and has since dropped the price twice to the current list price of $39,900. Someone trying to sell a property for roughly 70% less than they paid would indicate some level of motivation/desperation to get out of a property. I think the neighborhood label for this property would take it off the radar for a lot of investors. The fact that it is on the periphery of the neighborhood and separated from the rest of the neighborhood by an interstate both seem to be positives. The rents in the immediate area seem decent and actually above those of some buildings we already own. Even if we paid the current list price and factor in pretty conservative income and expense estimates, it would appear difficult to not make at least a 10% cash on cash return. That is what the internet tells me.

Is This a Deal?

There are not any pictures of the interior (which always makes me suspicious) with the listing, so it could look like this:

I have no clue whether the interior is trashed, if there are structural issues or if prior tenants used the property as a meth lab. So really all I know at this point is that it looks good on paper, based on my internet research, and my realtor (we are out of state) does not like the area. But for all the reasons listed in the prior section, I think it is worth investigating and that is what our realtor is doing.

Do I think this will turnout to be something we make an offer on? Experience tells me - NO. My guess would be there is some sort of major defect (structural, electrical, plumbing, mold, etc.) or the street is consistent with the rest of the less desirable neighborhood to the south. But my initial research failed to trigger any obvious red flags, so now it is time to get the real story...

Stay tuned for the assessment from our realtor.