Two Buildings One Offer

I hope you had a very Happy Easter! I am happy to say that things have been very quiet at my rental property. So quiet that I have been crunching some numbers on several properties that recently came on the market. I found two prospects that could work as a second investment property. I am looking to set up a seller-financed deal for this second investment to negotiate a lower downpayment. If the initial due diligence checks out I am hoping to make an offer by the end of next week. Both properties have one duplex building and one single-family home on the same lot. The properties are also both located in the Walker's Point neighborhood in the greater Milwaukee area. For the sake of this initial analysis. I am going to review the estimated expenses, current rents, and any unique qualities these properties have.

Property # 1

This property is priced at $160,000. The duplex in the front of the property is comprised of two 2-Bedroom 1-Bathroom units currently renting for $600/month and $700/month respectively. The single-family unit in the back of the lot has 4 bedrooms and 1 bathroom, and currently rents for $875/month. It also has a full basement and an unfinished attic. Tenants are responsible for all utilities except for water. Speaking of tenants, this property has two of the three units occupied. I would prefer for the building to be empty, as I've mentioned the potential difficulties with inherited tenants in a previous post, but that can be a contingency in my offer if I choose to go with this property. The mechanicals were updated but I would likely need to set more money aside for capital expenditures such as a roof replacement, water heaters, furnace, etc. My estimates for the total expenses are below: (These numbers are based on a downpayment of 12-15 percent)

Output:

$829/month for principle and interest payment

$253/month in Property Taxes

$133/month for insurance

Around $300/quarter or $100/month.

$250/month set aside for CapEx.

$100/month for monthly maintenance

Total Expenses: $1,665

Income:

Monthly Rental Income is $2,175

Cash flow after expenses is $510/month or $170/door.

Property #2

This one is priced at $155,000. The duplex in the back of the lot is also comprised of two 2-Bedroom 1-Bath units, which rent for $650/month and $600/month. The single-family unit in the front of the lot is a 4-Bedroom 2-Bath that rents for $1,000/month. The single-family also has a finished basement that could be converted into an additional unit. Both buildings have new vinyl siding, metal roofs, new furnaces, and mechanicals. The tenants pay all utilities, including water. All units have in-unit washer and dryers, and a parking space that one tenant could use for an additional fee. This property has only one unit currently filled, and I would still look to have the entire building vacated before taking possession of the building. I would estimate expenses as follows:

$803/month for principle and interest

$253/month in property taxes

$129/month for insurance

$250/month set aside for CapEx

$100/month for maintenance costs

Total Expenses: $1,535

Monthly Rental Income is $2,250

Cash flow after expenses is $715/month or 238/door

*If I am able to convert the basement into a fourth unit, that will increase the earning potential of this property.

I will hold out for the full home inspection, but ultimately, I am comfortable making an offer on either of these properties. Currently, I'm most interested in the second. I hope to report some good news in my next post, but as always, stay motivated and happy investing! 

Josh