My wife and I closed on our first duplex today. I say finally because our offer was accepted about 6 weeks ago and closing ended up being pushed back an entire week due to an estate being dismantled and causing all three children of the original owner(who all live out of state) having to sign individually. But, it was worth the wait I do believe.
Originally listed for 120k the listing agent was having difficulty getting into the south unit due to uncooperative tenants. Once access was gained the state of the unit was apparently less than acceptable. The tenants were evicted, the unit was cleared out and remodeling had begun. This was over a 4-5 month time period. When my wife and I looked at the property a majority of the remodeling had been completed in this unit and the current owners had agreed with the tenant in the north unit to also do new tile in his kitchen and bathroom, new counter tops, and a new deck on both units without increasing the list price. We negotiated a sale price 108k with all projects completed. The completed remodeling helped the appraisal came back at 136k.
We were able to do 80% LTV over 25 years at 4.75%. At closing today, our earnest funds($1000) and the seller tax proration($3039) covered everything for closing and we walked out with a check for $119. Both units are currently rented at $700/mo and we signed new 1 year leases today as well as collecting all of June's rent with our first mortgage payment of $608 due next month. The $700 deposits for each unit was also transferred to us today.
We will have property taxes of $3400 due in September but I am quite pleased with how this deal ended up working out.
Congratulations! It is rare that all those improvements would be done by choice of the current owner at literally no extra cost to you. That's awesome. You also avoided what could have taken much longer than 6 weeks with the confusion and trouble with the separate signatures. I'm glad no one backed out because of the hassle. It's great you were able to sign new leases too and that the rents will more than cover your mortgage. Just make sure you can cover expenses (are utilities included in rents?) Otherwise you could be looking at paying around 50% of your rental income in expenses such as water, sewer, electricity, gas or oil, trash, and property maintenance, as well as insurance and that hefty tax bill.
Best of luck! Hope to be writing a post like this soon!!
" We were able to do 80% LTV over 25 years at 4.75%. At closing today, our earnest funds($1000) and the seller tax proration($3039) covered everything for closing and we walked out with a check for $119 "
Tenants are responsible for all utilities, including water/sewage, lawn care, and snow removal. NOI after vacancy and maintenance $10,180 and Cap Rate is 9.4%.
@Devin Berrian I think they were in a bad position of needing to get the previous tenants out to get it sold, but also needed to get it fixed-rented to pay the mortgage so we just happened by at the right time. And I think that it had been such a hassle is what kept them from backing out.
1400 per month for a 108k is not great. it's OK.
the good thing u have going is that it will be unlikely that both will be empty at the same time, so you won't have a full month of vacancy.
keep plowing ahead!
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