A little guidance please

[Jim Zatko]

Hi I'm new to BP. I've been involved in real estate for a few years, building our own house and selling it for a profit 2 years later. We did that twice, and we have a lot of equate saved. We opened a home equity line of credit for $74,000. It's good for 10 years and it's interest only. and the rate is 3%. Super cheap. So i'm looking to put my equity into good use buying a rental. I'm currently looking at buying a Twinplex that is already occupied. One unit is renting at $500 and the other at $400, so $900 total for rental income.. The list price is $65,000. I am considering offering around $60,000. Taxes are about $1,000 per year. Is this a no-brainer type deal? What word of caution would you give me? Thanks Guys (and ladies).

Jim

[Andrew Syrios]

It doesn't sound bad cash flow wise, but it doesn't sound like a no brainer, either. Properties with lower rents can be hard to cash flow ($400/month is really the lowest I would consider). I suspect you can raise the rent on that one unit to $500 at least, so that's a good value add. But there are some key questions I would need answered:

1. Does it need any repairs or at least upgrades?

2. What are nearby duplexes' selling for? What do you think the ARV on this property is?

3. Are they quality tenants and are they current on their rent?

4. What is your goal? I'm assuming it's to buy and hold. But even if that is the case, you should still be getting it under market value.