All Forum Posts by: Tara Piantanida-Kelly

@Joshua Dorkin , like this? http://www.biggerpockets.com/files/user/tpkelly/file/duplex-analysis-using-bp-calculator This is the analysis using BP's rental calculator. I have two other documents showing additional analyses (plural of analysis - I looked it up!) for anyone who is interested.

@Graham Mink , that would be AWESOME!!

Thanks, @Daniel Ringwald and @Christina R. !

Thanks, @Chris Adams ! That's a great way to look at it!

You remembered, @Roy N. ! We ended up cherry-picking the one we thought was better.

I've been stuck in analysis paralysis for a while! This time, I felt comfortable with the numbers, and we jumped! This one isn't going to make us millionaires, but it's our first step on this exciting journey!

@Susan Gillespie

- Thanks for the reply!

Hi Tara, what is the condition of the duplexes? Pretty good. New furnaces and water heaters. Newer roofs.

Are they currently rented, or vacant and need repair? All 4 are currently rented. Month-to-month after the initial 1-year lease expired. 3 of the 4 units are rented at under market rates.

What is the housing quality and price trend in the neighborhood? It's quite mixed. It's a rural area, but with a desirable school district and few rentals in the area.

Have you included all expenses? I think so. My initial analysis used 10% of gross monthly rental income for CapEx and another 10% for repairs and maintenance. That brought the COC and cash flow estimates way down, but I'd rather be safe than sorry.

Do you have time, experience and/or a property manager for taking on four units? The existing property manager (along with the realtor) brought us through the properties. He's local, and has been managing them for quite a few years. We would look to keep him on.

My thoughts:

-Is one duplex better? Cherry pick the best one if you're more comfortable with costs. Partners can be a lot of work and it takes time to find the right partner and type of agreement. That's exactly what my husband and I were just discussing during dinner. We're now thinking that perhaps we should just make an offer on the larger duplex - it's a bit more money, but it also has a higher annual income. And we would have to come up with less for the down, closing costs and due diligence.

-I wouldn't borrow IRA money for real estate due to penalty potential. Or would you live in the duplex to take a penalty free withdrawal? We're not looking to withdraw from the IRA (which would cause penalties and a tax liability). We're looking to do a short-term loan against a portion of the IRA.

-I don't have detail on expenses in your analysis, or know age, condition or deferred maintenance issues, but I look for net cash flow of at least $300/month. You're just under, but maybe you see something else compelling in the deal? The property was built in the early 70's. For our area, that's young! (My house is over 100 years old!). The roofs are newer, and all four units have new furnaces and new (or newer) water heaters.

I rely on cash flow projections and internal rate of return for my buy and hold decisions. Good luck with yours. Let us know how it goes.

Thank you, thank you, thank you, Susan! Your input is incredibly helpful!

@Roy N.

Or ... maybe you have the ability to improve your current deal. You've stated the cash needed as 41.25K, but you have not indicated the ask & offer prices, nor the LTV you are aiming to achieve.

We're looking at offering $125,000 for the package. 25% down ($31,250) and $10,000 for closing and due diligence. We can borrow the $41,250 against an IRA with no penalties (other than interest on the loan), but that, of course, will affect our cash flow estimates.

Perhaps what we should do is just look at the larger duplex. We would probably only need $24,000 to get in (25% down = $19000 plus $5000 for closing and due diligence). The amount we borrow against the IRA would be less, and we could pay it in full when we sell a different property this spring.

Thanks, @Kevin Brown ! That's good info!