Please Help!- I need your analysis opinion on a duplex
Your thoughts are appreciated!!!
currently negotiating:
Duplex, unit 1 = 2bed/1bath, unit 2 = 2bed/1.5bath. no garages but plenty of private off street parking.
Asking: $77k, currently negotiating, below expenses are assuming a negotiated 68k purchase price.
Rent: 525(4yr tenant) + 575(7yr tenant)= 1,100/month,
This property is a C class, nearly a B class neighborhood.
Property ANNUAL Expenses:
$(660) 5% cap ex
$(660) 5% maint.
$(660) 5% vac., typically has longer term tenants
$(1,056) 8% prop. management, although will self manage foreseeable future
$(1,535) prop. taxes
$(840) prop. insurance
$(600) trash - this could be removed, he is providing a dumpster but city has free trash
$(1320) snow removal & lawn care, tiny yard
---------
$(7,331) total annual property expenses, not including mortgage
$(3,543) Mortgage 30yr, 5% fixed, $68k purchase price, 20%down =54k mortgage
--------
$(10,874) total expenses including mortgage
$13,200 total ANNUAL Rents
------------
$2326 - annual cashflow (average $193/mo),
$15,000 - upfront cash invested, the 20% down on mortgage + 2k closing, misc.
$2,280 - additional annual cashflow potential through expense cutting and rent increases
there is about $7k of differed maintenance of mainly cosmetic interior updates/flooring once the long term tenants eventually move out. The current owner bought the property as condemned, in coordination with the city & permitting to get certificate of occupancy, he had to put in all new copper plumbing, new waste lines, new central HVAC, new siding, new windows, new roof. Also, the city has free trash but he has a dumpster in the property parking lot which costs are split with the next door duplex. I think its dumb, he says he uses it too occasionally when he needs to get rid of stuff they can use city trash at no cost just get some trash cans, that would be a $600/yr savings. Also rents are depressed because of him not raising rents on long term tenants, should be atleast $600/unit so there is another $1,200/yr in possible income in the future once deferred maintenance and some tenant turn over occurs. I also think the lawn care can be removed. extreemly tiny lawn only in front could be changed over to mulch with low maintenance basic landscaping which would be an additional $480/yr in savings.
this would be my official second investment property
should I do it at 68k? thoughts?