duplex for 400k price, profit will be $3250 a month, cost $3100 a month. Is $150 cash flow worth it in anyone’s opinion?
150 a month, you're kidding, right? Why would anyone do that ? Easily can lose money each month,
Good luck
I would do it because I’m still gaining 17k a year in equity on principle payoff and safe to say 5% appreciation a year. Which is roughly another 10-20k. I believe those factors play a role.. especially for my 25k sitting in a bank account making nothing.
you hope it appreciates, its already inflated ( will most likely depreciate )like all of America, NOT a good strategy, You can easily go upside down each month, But what do I know :)
duplex for 400k price, profit will be $3250 a month, cost $3100 a month. Is $150 cash flow worth it in anyone’s opinion?
150 a month, you're kidding, right? Why would anyone do that ? Easily can lose money each month,
Good luck
I would do it because I’m still gaining 17k a year in equity on principle payoff and safe to say 5% appreciation a year. Which is roughly another 10-20k. I believe those factors play a role.. especially for my 25k sitting in a bank account making nothing.
duplex for 400k price, profit will be $3250 a month, cost $3100 a month. Is $150 cash flow worth it in anyone’s opinion?
150 a month, you're kidding, right? Why would anyone do that ? Easily can lose money each month,
Good luck
I would do it because I’m still gaining 17k a year in equity on principle payoff and safe to say 5% appreciation a year. Which is roughly another 10-20k. I believe those factors play a role.. especially for my 25k sitting in a bank account making nothing.
you hope it appreciates, its already inflated ( will most likely depreciate )like all of America, NOT a good strategy, You can easily go upside down each month, But what do I know :)
New to Real Estate · Texas Christian University · Member since 2022 · 118 posts · 56 votes
3y
Thomas, if you have 10k-20k in cash reserves then $150 cashflow is fine. If you have little to no cash reserves then the investment becomes significantly more risky. As you hold the property the property will appreciate overtime. If you can add value through a rehab this will increase cash flow. Over the years rents have typically increased by 1%-5% each year. Again, if you have solid reserves then you should defiantly pursue this investment.
Lender · Winter Park, FL · Member since 2021 · 737 posts · 412 votes
3y
I would shoot for a minimum 10% cash on cash return assuming it's in an appreciating market, I like to be at 15% min. This would be too skinny, unless you have the ability to increase rents shortly after closing. If the tenants are locked in it would be a pass for me.
Thomas, if you have 10k-20k in cash reserves then $150 cashflow is fine. If you have little to no cash reserves then the investment becomes significantly more risky. As you hold the property the property will appreciate overtime. If you can add value through a rehab this will increase cash flow. Over the years rents have typically increased by 1%-5% each year. Again, if you have solid reserves then you should defiantly pursue this investment.
Yes I have reserves.. just trying to park some money in the meantime while I continue to look for opportunities. Unfortunately it’s a turnkey duplex with all new everything. So my ability to create more equity with renovations or upgrades is limited. But also the flip side is my overhead for repairs or maintenance is very low as well. I understand such a low cash flow is very unappealing. Wanted to hear others opinions on if they have done the same and in hindsight would recommend or not.
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
3y
You should consider investing in OOS here in Columbus. The price to rent ratio makes for great investments. Not to mention our appreciation has been 8% higher than the US national average, because of the high demand for affordable housing.
Rental Property Investor · Milwaukee, WI · Member since 2013 · 281 posts · 133 votes
3y
Nope don't do it. All it takes is one bad tenant, replace a roof or water heater ETC... Look for the worst property in the best neighborhood fix it up, and have built in equity. Talk to wholesalers, get a good agent, go to REIA meetings, and find off market properties. Don't rush it when you find the right priperty the numbers will be easy to justify. The fact that you are questioning the deal means you feel its not right.
Real Estate Agent · Columbus, OH · Member since 2016 · 593 posts · 664 votes
3y
Hard to say without seeing your exact numbers. If you are being conservative with a 50% expense ratio could work.. but if your rents are $3250 and piti is $3100 I would say this is a no go!
Rental Property Investor · Member since 2021 · 12 posts · 5 votes
3y
Investor in northwestern PA.. we are not seeing promising appreciation here so I'd right this one off. Especially a duplex, wouldn't shake a stick at it for at least $300-$500 cash flow in our area. Now if you're talking Pittsburgh, State College or Philly, your appreciation may be better than ours and would be something to consider. But since you didn't note anything about appreciation I'd say it's not good in your area, and a good one to walk away from.
I am in the southeastern PA suburbs which I can imagine is much different than majority of anywhere else in PA. Things are extremely competitive down here and most house still sell for over asking price.
Property Manager · Raleigh, NC · Member since 2014 · 728 posts · 596 votes
3y
Not for me at those numbers. at $150 per month, a single month vacancy (which you will have) will cost you most your profit for the year. Then what happens when the fridge or stove goes, another 6 months of profit. Unless you have been crazy conservative on your numbers, or there will be massive appreciation (which I personally never count on for my numbers) this will probably be a losing investment.
duplex for 400k price, profit will be $3250 a month, cost $3100 a month. Is $150 cash flow worth it in anyone’s opinion?
Need more info.
How is the area? Is it due to appreciate over time in rent and price?
Also, for your cash flow what have you factored in as expenses? If you've estimates expenses accurately and accounted for everything and this is in a good B class area then I think this isn't bad. If your cash flow calculation includes savings for capex and repairs and everything then I think you'll be fine.
Also, I will say that you commenting on including the paydown of the loan as wealth growth is something good to consider. A lot of people pass on opportunities because they look at ONLY cash flow and don't consider the whole picture.
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
3y
@Thomas Corso- 1) if rental income is only $150 above expenses - thats a very small margin to be comfortable with 2) what mtg rate are you using to calcualte the payment ? 3) if the property has a ton of upside apprecation in the short term - it might be worth the skinny margin with the plan to sell it within a few years 4) if you proceed - make sure you are prepared and able to carry a neg rent on it for some time ( incase something happens ..like taxes are raised / repairs cost more / vacancy happens / etc ...)
Thomas, if you have 10k-20k in cash reserves then $150 cashflow is fine. If you have little to no cash reserves then the investment becomes significantly more risky. As you hold the property the property will appreciate overtime. If you can add value through a rehab this will increase cash flow. Over the years rents have typically increased by 1%-5% each year. Again, if you have solid reserves then you should defiantly pursue this investment.
“The property will appreciate over time”. DO NOT ASSUME THAT, especially in Pennsylvania that have markets that are not fast growing pop or job growth.
😆 Do you understand market cycles and where we are now in the market cycle?
I am in the southeastern PA suburbs which I can imagine is much different than majority of anywhere else in PA. Things are extremely competitive down here and most house still sell for over asking price.
To me this really matters your goals and where exactly you are talking. Southeastern PA is much too broad. If this was in a great school district like Haverford for example, it could be a great appreciation play.
Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
3y
Unless this is in a very hot, appreciating area or you plan to live there, I would pass. You cannot guarantee that the property will appreciate, and if value stays the same, everything is going to be old in 10 years and you'll start to have to spend money to update and replace mechanicals. In my market its those renovated properties that are best suited for live in investors who plan to rent out the other unit, reducing their living expenses.