Can you please help me analyze my potential first deal

Question

I thought I had the numbers down "knew what I was doing". But, now I'm just getting confused. This is a duplex. Not a lot of repairs need to be done at this point. Maybe some paint after current tenants move out and in 5 years or so some other cosmetic stuff. Tenants do snow removal/lawn care and pay for all utilities. I would take out a loan with a 20% downpayment

Selling price: $205,000

Unit 1 is renting for $1,000

Unit 2 is renting for $800

Property tax: $2781

Insurance: $1145

Maintenance and repairs: I calculated at $3,000 (that's what previous owner listed but I'm really not sure.)

Without adjusting any of the previous owners numbers (there may be potential for increase rent), I calculated a pre-tax take home of $149/month or $1,800/year. I calculate the CoC return of only 3.6%. I'm assuming that if the numbers don't change (unless there is rent increases), this would not be considered a good deal, correct? I am a numbers girl, but I am getting confused at this time.

Nicholas L. · Answer

@Brenda Reems

i think you'll be negative every month on this one.  "not a lot of repairs" is not specific enough... how old is the roof?  how old are the HVAC systems?  are the appliances in good shape?

but with a duplex you generally have 2 of everything - 2 furnaces, 2 dishwashers, etc.  lots can break.

so - pass

Brendan Mace · Answer

Brandon Turner's book was written a very long time ago. Cash flow in real estate has gone down in general a lot since then. The game has indeed changed. There are many variables that matter which you learn over time.

My opinion is that if the property cash flows anything then just DO IT. Get in the game and learn from the experience. You can't really lose with insurance and a net cash flow property. At least it is unlikely. I have over 10 million in real estate that I have grown and the first deal was not perfect. But who cares. Better than waiting around on the sidelines. Get in the game.

Arman Ahmed · Answer

@Brenda Reems

Brenda,

You’re asking the right questions, and it’s great that you’re digging into the numbers before jumping in. A few things to consider:

• Cash Flow & Returns: Your current rents ($1,800 total) put you just under the 1% rule, but you’re close. If you transition to MTR (mid-term rentals) and can get $1,200–$1,800 per unit, that could significantly boost your cash flow.

• Expense Cushion: Maintenance at $3,000 might be optimistic, especially with a duplex (two of everything). Have you factored in vacancy, capital expenditures (roof, HVAC, plumbing, etc.), and potential management fees?

• Loan Terms: The interest rate and loan terms will play a big role in whether this deal makes sense long-term.

I invest in Columbus, OH, and work with out-of-state investors looking for cash-flowing properties. If you’re open to other markets or want a second set of eyes on your deal analysis, let’s connect. I’d be happy to walk through the numbers with you and see if this aligns with your investment goals!

Steve Hung · Answer

Hi Brenda, I'm no expert here but referencing Brandon Turner's book "Rental Property Investing," his (at least) 2% rule of thumb gauge (used for quickly analyzing a property's cashflow) states that:The 2% rule states: "...simply the ratio between rental income and purchase price.  Meeting the 2% rule means that a property's monthly rental income must equal 2% of the purchase price or greater." Obviously, each case is different but your current deal is only 0.9%. So, quite below the 2% mark.

Latrice Singleton-Vielot · Answer

Great advice.. get in the game.

Steve Hung · Answer

Brenda, understood. And thanks for sharing your insights.

Brenda Reems · Answer

Thank you for your response. This areas is great for MTR. Furnished units are renting from $1,200-1,800 for a 2 bedroom. This duplex has 1 2bd and the other is a 3bd. However, with that the tenant would no longer pay all utilities and would need to furnish. I work in the hospital and the travelers biggest complaint is that there isn't housing available. This town has a military base, fairly good sized hospital (for the region) and a university.

Does that change your perspective?

Can you please help me analyze my potential first deal

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