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Updated about 6 years ago on . Most recent reply

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Matt Granzow
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Duplex + Laundromat - What am I missing on this deal?

Matt Granzow
Posted

Looking to purchase our first investment property. Here's a link to the rental property calculator report. The rents and Laundromat (hands off operation) income are as listed from the MLS link.

https://www.biggerpockets.com/calculators/shared/1298021/2af81e07-cedc-4f31-b6dd-35b98f991d95

C class neighborhood, on a busy street.  (2+1)/2 duplex + laundromat.  I say 2+1 because in order to get to the 3rd bedroom you need to walk through another bedroom.  It has a 2 car garage + a parking spot, 2 street spots out front.  Owner is selling "as-is".  Owner pays utilities for Laundromat, the average was $326/mo.  Tenants pay their own utilities.  The place seems in decent condition in a quick first walk through, but we were unable to see the basement or upper unit.  Those are both viewable on a second showing.  The place was a mess.  Garbage, cigarette butts, dog poop on the patio, etc.  IMO those tenants would need to go which would give an opportunity to clean it up and possibly raise the rents a little.  

Since I'm completely green, I'm interested in hearing your thoughts.

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113
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Matt Maurice
  • Property Manager
  • Milwaukee, WI
144
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113
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Matt Maurice
  • Property Manager
  • Milwaukee, WI
Replied

Hey @Matt Granzow,

5% Vacancy is fine for residential in Milwaukee, shouldn't be an issue to equal or beat that number.  

I'm not a fan of using a % for Cap Ex... your roof doesn't care what your rents are when it's time to replace it, it's a flat number.  Budgeting Cap Ex with % tends to drive you to lower rent properties.

Everyone's opinion of what a  C neighborhood in Milwaukee varies, but I'd venture a guess your maintenance budget at 5% is a bit low.  In a typical C property it's not uncommon that you need to paint the entire unit on a turn, repair some broken items (storm doors, blinds, cabinet doors) and probably every other you are repairing or replacing some flooring. Unless you plan to do most of that work yourself, you might want to beef that number up a bit.  

Water, Taxes, Electricity and Insurance I'm assuming you got the actual information (or close to).

10% for management is likely fine, you may want to increase that just a bit though.  While many MIlwaukee companies charge 10% (or a little less), they all charge for placing a tenant and various other services, bringing your blended total cost higher than just 10%.  I assume you will be handling the laundromat, so shouldn't need any management help there.  

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