We just closed on our second duplex! I wanted to wait a little longer to build up our cash reserves a little bit but this deal popped up: duplex built in 1978, 2 beds/1bath each side, fully rented, 5 minutes from our first duplex, retired out of town owner. It was on the market for 3 or 4 months and the asking price dropped so I figured they were getting a little anxious. Sent my inspector in and he came back with a laundry list of repairs which I had my agent forward to the owner along with a lowball offer of $40k cash. He countered at $45k and we closed within a week.
Here's the break down:
- Purchase price + closing - 46,400
- Immediate repairs - 700
- Total cost. 47,100
Current rents ($450/side) =. $900 month Expenses
- Insurance - 63
- Taxes - 58
- Management. - n/a
- Maintenance. - 60
- Water/sewer. -60
- Mortgage. - 0
- HOA. - 0
- Vacancy 10%. - 90
- Repairs 10%. - 90
Total monthly expense 421 Cash flow. $479 mo = $5748 annual = 12% cap rate The plan is to defer other repairs/ updatesuntil current tenants move out. Budget $4k per side and we're sure we could get $500 maybe $550 per side. Section 8 in the area pays $725 for 2br/1ba so we're thinking about doing that. Any thought on section 8 tenants?
