My mother owns a duplex in Central Florida, and she wants to give it to me in exchange for paying future property taxes. Caveat is that I can't sell it b/c it is next to my parents house and they dont want it to leave the family.
I have a little more than 12k to spend on repairing the property. Say it takes 10K to fully repair (estimate based on comps in the area). Consideration for the property is $1.
House is valued at 47k about 3 years ago. I am going to rent it to HUD/Section 8 says that renting both sides of the property will be capped at 500 each side. Below are my numbers (I ran the numbers as if I am financing the 10k through HUD at a 30 term, although I'm just losing potential interest 2-4%)
| Purchase Price | $10,000.00 |
| | | |
| Home Value | | | $47,500.00 |
| | | |
| Interest Rate | | | 3.5% |
| Down Payment | 6.00% | of the purchase price | $600.00 |
| Amount Financed | $9,750.00 |
| | | |
| Income | | | |
| Rent | | | $1,000.00 |
| Other Income | | | 0 |
| Capital Appreciation Rate | -1.60% | per year of home value | $46,740.00 |
| Total Income | $1,000.00 |
| | | |
| Expenses | | | |
| Mortgage | 30 | year term | $27.08 |
| Taxes | 1.05% | of value of home | $41.56 |
| Insurance | | | $100.00 |
| Flood Insurance | | | |
| Repairs | 10% | of the mortgage | $100.00 |
| Vacancy | 10% | of the monthly rent | $100.00 |
| Capital Expenditures | 10% | of the monthly rent | $100.00 |
| Water | | Tenant pays | $0.00 |
| Sewer | | Tenant pays | $0.00 |
| Garbage | | Tenant pays | $0.00 |
| Gas | | Tenant pays | $0.00 |
| Electricity | | Tenant pays | $0.00 |
| HOA Fees | | Flat |
| Lawn Care | | | $25.00 |
| Property Management | | | $110.00 |
| Total Expenses | $603.65 |
| | | |
| Cash Flow | $396.35 |
| Cash on Cash Return on Investment | 66.06% |
| Annual NOI | | | $4,756.25 |
| Cap Rate | | | 792.71% |
Am I missing something critical? The HUD waiting list is packed in the area, but should I account for more vacancy? Repairs? I can't believe that the cap rate could be that high.
I whipped up my own spreadsheet, so I could understand the numbers. I need someone to (gently) pop my bubble here. I have a property management company in mind, plus I have a nephew that will mow the lawn once every two weeks.
