Need help analyzing this deal

11 Replies

I need some input on this Duplex deal. I have a banker that will do 100% finance on them for 30 years at 5.75 interest rate. The seller has owned this property since 2005! One tenant has been there  20 years. Wood floors in some, new Roof, New A/C in units 1970 and 1972. Well maintained and ready to be sold. The units are 100 percent occupied and the units are separately metered. The property is located in a c or d area located around college campus. The owner also has two more duplexes at this price.  

Asking Price- $65,000

3 BR  2 BA

21-30 Years of age

Total Square Footage- 2,250

Income - $1100 a month

Patrick Rowe, Triumph Construction

Deal...look at cap rate...looks close to 10%. But area may concern...yet tenants appear to be strong. 

ok thanks, how much cash flow are you coming up with?

Patrick Rowe, Triumph Construction

Rent - Vacancy - expenses = Net Operating Income (NOI)

NOI - debt service (PI) = cash flow

You have not given enough information to calculate cashflow.

@Patrick Rowe  

What other information do you need? I'm coming up with $621.00 per month including taxes, insurance.

Taxes -$900 year

Insurance - $2000 year

Patrick Rowe, Triumph Construction

The number look good but honestly I always look at the cash on cash return ;) this helps me evaluate the true "deal" since it looks at home much money I will have to out down!

Ok thanks, I have a lender that will do a 100 percent finance on this deal. I'm just trying to make the duplex will cash flow. Once I use the 50 percent rule for expenses it doesn't cash flow. 

Patrick Rowe, Triumph Construction

Originally posted by @Patrick Rowe :

Ok thanks, I have a lender that will do a 100 percent finance on this deal. I'm just trying to make the duplex will cash flow. Once I use the 50 percent rule for expenses it doesn't cash flow. 

We need to work on your math then.

$65,000 financed for 30 years at 5.75% = P&I of $379.32 a month.

If income is $1,100 a month... after 50% expenses you're at $550 a month... subtracting P&I is 170.68 a month.

Unless there are a bunch of utilities tied into this deal, sounds like an absolute no brainer.

Also, some of your numbers make no sense.  You say the building is 20 - 30 years old but that the A/Cs were new in 1972 which is over 40 years ago.

Make sure you have the cash reserves for any surprises to stabilize units... but 100% financing on units that cash flow (at or near 2%) is a great deal IMO.

Ok thanks, I understand your at $379 a month P&I you still need to add in taxes,insurance  that put you at $621 a month.The 1972 was a the address number for the property no the year it was built. I was a typo on the part.

Patrick Rowe, Triumph Construction

Also the tenants pay for all the utilities, lawn care. The owner manages the property himself.

Patrick Rowe, Triumph Construction

Patrick best of luck to you.  Have you tried using the investment analyzer on the Bigger Pockets website.  Very easy to use and it might give you some assurance of your analysis.

Ok thanks, I haven't use it before.

Patrick Rowe, Triumph Construction

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