Duplex with small cash flow advice
Member since 2023 · 13 posts · 7 votes
Duplex with small cash flow advice
Most Popular Reply
Quote from @Thomas Corso:
Quote from @Bob S.:
Quote from @Thomas Corso:
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
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 :)
45 Replies
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Thomas Corso:
25k down . Total cost to close. Location is Pennsylvania.Quote from @John O'Leary:
How much are you having to put down? Location?
If it's located in CA major city I would accept it, but if it's in PA MF and only 100 bucks cash-flow, then I would skip it.
- 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
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- 3yAlan AsriantsBusiness MemberReal Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
This all depends how much money you are putting into the deal. Seems low from my initial calculation. if youre doing a 0% down VA loan, its not bad since you practically have nothing in the deal.
Calculate your CoC (Cash on cash) return. I typically aim for 12%+. If I really like the property ill go as low as 9%
CoC = (Monthly cashflow after expenses*12 month/total cash invested)*100%
So if all in your investment is 18,000 including down payment and closing costs, your CoC is 10%
$150*12/18,000)*100% = 10%
Alan Asriants - New Century Real Estate 591 Reviews - Member since 2023 · 13 posts · 7 votes3y
Quote from @Sarah Ziehr:
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.
It’s a turnkey duplex, everything is new. Obviously not an absolute, but generally speaking I would most likely be good the next 15 years. Of course anybody could say will maybe not , but anybody could say that about any house. And logically speaking, all new appliances, hvac, flooring, etc will be way less risky from a maintenance perspective.
- Member since 2023 · 13 posts · 7 votes3ywith that formula I would be cutting it close
Quote from @Alan Asriants:
This all depends how much money you are putting into the deal. Seems low from my initial calculation. if youre doing a 0% down VA loan, its not bad since you practically have nothing in the deal.
Calculate your CoC (Cash on cash) return. I typically aim for 12%+. If I really like the property ill go as low as 9%
CoC = (Monthly cashflow after expenses*12 month/total cash invested)*100%
So if all in your investment is 18,000 including down payment and closing costs, your CoC is 10%
$150*12/18,000)*100% = 10%
about 9.5 percent - New to Real Estate · Texas Christian University · Member since 2022 · 119 posts · 56 votes3y
Quote from @Jon Q.:
“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.Quote from @Hunter Reed:
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.
😆 Do you understand market cycles and where we are now in the market cycle?Actually, I do understand the market cycle we are currently facing. The housing market is in a correction phase. Holding the property 5-10 years the property will defiantly appreciate in value. As the dollar continues to be inflated prices are bound to go up. Is that true for this year and maybe the next 2 years, no it is not. I would never buy in an area unless I had solid calculations that the property would appreciate in the coming years.
- Columbus, OH · Member since 2023 · 427 posts · 254 votes3y
Depends on a few things: what kind of cash reserves you have, what % you put down, is it a high appreciation market? $150 is better than nothing especially when building equity, but all it takes is a bad storm or an HVAC issue for you to be net negative.
- Member since 2023 · 13 posts · 7 votes3y
Quote from @Hunter Reed:
Quote from @Jon Q.:
“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.Quote from @Hunter Reed:
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.
😆 Do you understand market cycles and where we are now in the market cycle?Actually, I do understand the market cycle we are currently facing. The housing market is in a correction phase. Holding the property 5-10 years the property will defiantly appreciate in value. As the dollar continues to be inflated prices are bound to go up. Is that true for this year and maybe the next 2 years, no it is not. I would never buy in an area unless I had solid calculations that the property would appreciate in the coming years.
Some people act like condescending jerks on here. Like it’s okay to have healthy and professional speculation on tight margins and profits, etc. For anyone to pretend they definitively know “the future market cycle” or how things shape out, is outlandish and full of hubris.
- 3yAlan AsriantsBusiness MemberReal Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
@Thomas Corso
What kind of financing? Can you give us more info on the deal?
Alan Asriants - New Century Real Estate 591 Reviews @Thomas Corso how certain are you that area will appreciate 5% YoY? Also, even tho it is turnkey with relatively new big ticket items it does not mean they won't breakdown. If you are thinking a home warranty will cover it, I wouldn't count on them. They take their sweet time addressing issues, and if you the HWT go out while you have tenants in there, you cannot wait for the home warranty to address it. You will need to get a guy in there to fix it right away, and that alone will eat away your monthly cashflow. Then you'll be taking money out of pockets to address these issues leaving you already upside down. The numbers just don't make sense to do such a deal.....but this is my personal opinion.
- Rental Property Investor · Queens, NY · Member since 2021 · 35 posts · 6 votes3y
@Thomas Corso I would avoid this headache my friend. Focus on small multi family properties and more than $150 a door. You can also create my cashflow by adding things like coin operated washer dryer. Perhaps a storage container you charge monthly for. You got this!
- Wrong again.
Quote from @Hunter Reed:
Quote from @Jon Q.:
“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.Quote from @Hunter Reed:
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.
😆 Do you understand market cycles and where we are now in the market cycle?Actually, I do understand the market cycle we are currently facing. The housing market is in a correction phase. Holding the property 5-10 years the property will defiantly appreciate in value. As the dollar continues to be inflated prices are bound to go up. Is that true for this year and maybe the next 2 years, no it is not. I would never buy in an area unless I had solid calculations that the property would appreciate in the coming years.
no property will “definitely appreciate”. No one can tell for sure whether a property in a given market will appreciate and when. That said, I can project cash flow at a rate if 95%+. Quote from @Thomas Corso:
Quote from @Hunter Reed:
Quote from @Jon Q.:
“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.Quote from @Hunter Reed:
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.
😆 Do you understand market cycles and where we are now in the market cycle?Actually, I do understand the market cycle we are currently facing. The housing market is in a correction phase. Holding the property 5-10 years the property will defiantly appreciate in value. As the dollar continues to be inflated prices are bound to go up. Is that true for this year and maybe the next 2 years, no it is not. I would never buy in an area unless I had solid calculations that the property would appreciate in the coming years.
Some people act like condescending jerks on here. Like it’s okay to have healthy and professional speculation on tight margins and profits, etc. For anyone to pretend they definitively know “the future market cycle” or how things shape out, is outlandish and full of hubris.
Those “jerks” have much more experience than you do. FYI: me 25 years across 5 states and 8 cities. Broker in 3. Learn to be humble and open to learning from others more experienced than you are. That is much less painless than going bankrupt or spending years working for free.
I wish you the best.
- FYI: Your “experience” on your profile… reads “0 years”.
Quote from @Hunter Reed:
Quote from @Jon Q.:
“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.Quote from @Hunter Reed:
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.
😆 Do you understand market cycles and where we are now in the market cycle?Actually, I do understand the market cycle we are currently facing. The housing market is in a correction phase. Holding the property 5-10 years the property will defiantly appreciate in value. As the dollar continues to be inflated prices are bound to go up. Is that true for this year and maybe the next 2 years, no it is not. I would never buy in an area unless I had solid calculations that the property would appreciate in the coming years.
- 3yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Thomas Corso On a lot of my properties I average $150-200 per door. Plus I get depreciation, tax benefits, and have all my reserves being met.
I do save up a good cushion to cover potential larger expenses I wasn’t expecting before I start realizing the cash flow in the form of any type of payment to myself though.
Quote from @Thomas Corso:
Quote from @Sarah Ziehr:
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.
It’s a turnkey duplex, everything is new. Obviously not an absolute, but generally speaking I would most likely be good the next 15 years. Of course anybody could say will maybe not , but anybody could say that about any house. And logically speaking, all new appliances, hvac, flooring, etc will be way less risky from a maintenance perspective.
Cap ex is real. The expense allocation starts on day 1. For example if I have a water heater that costs $1.5k to install and has an expected life of 10 years, the cap ex is $150/year or $12.50/month. Cheap rental kitchens $40/month. Etc.
I fear from your reply that your cash flow estimate is rent minus PITI. I hope not and suggest you learn the 50% rule. There are countless expenses and of course vacancy. Also small unit LL typically are challenged to perform quick tenant turn overs because they do not have their own staff.
Even if you allocated properly for all expenses, I would never choose to own residential RE at $75/unit. Even with use of PM, the effort is too great for $75/unit.
I also agree that I am not convinced the market indicated is likely to have long term appreciation in excess of inflation. You can use neighborhoodscout to see its appreciation since the year 2000 (both as total appreciation and as an annualized number). Does it exceed 3% annualized? If so, does it exceed it by enough to warrant the effort if the cash flow is only $75/unit?
I suspect this property will not produce the type of return you are hoping for.Good luck
- New to Real Estate · Texas Christian University · Member since 2022 · 119 posts · 56 votes3y
Quote from @Jon Q.:
FYI: Your “experience” on your profile… reads “0 years”.Quote from @Hunter Reed:
Quote from @Jon Q.:
“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.Quote from @Hunter Reed:
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.
😆 Do you understand market cycles and where we are now in the market cycle?Actually, I do understand the market cycle we are currently facing. The housing market is in a correction phase. Holding the property 5-10 years the property will defiantly appreciate in value. As the dollar continues to be inflated prices are bound to go up. Is that true for this year and maybe the next 2 years, no it is not. I would never buy in an area unless I had solid calculations that the property would appreciate in the coming years.
Thank you Jon for your insight! Ironically enough after I sympathized with Thomas Corso, I was reading multi-family millionaire by Brandon Turner, he hit on a key point about appreciation. You can not rely on appreciation if you are barely cash flowing a property. Focus more on stronger cash flow and less upon appreciation. Jon your interpretation is absolutely correct. You're right, Im wrong, and I apologize for questioning your intelligence. Have a great day!
- 3yElise Bickel TauberBusiness MemberReal Estate Agent · Cranberry Twp · Member since 2017 · 385 posts · 198 votes
The only reason, in my opinion, to purchase an investment with such low cash flow on paper is if you are purchasing for long term appreciation. If you are just hoping to purchase something with minimal out of pocket costs to re-sell in 10-20-30 years for your profit, then yes. It isn't bad. But if you are looking at cash flow, I think thats way too low.
- Realtor · Bellevue, WA · Member since 2019 · 882 posts · 1k+ votes3y
Good for now, because cash flow is only once benefit, but you get other benefits like mortgage pay down and appreciation.
Cash flow will be better down the road
Quote from @Hunter Reed:
Quote from @Jon Q.:
FYI: Your “experience” on your profile… reads “0 years”.Quote from @Hunter Reed:
Quote from @Jon Q.:
“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.Quote from @Hunter Reed:
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.
😆 Do you understand market cycles and where we are now in the market cycle?Actually, I do understand the market cycle we are currently facing. The housing market is in a correction phase. Holding the property 5-10 years the property will defiantly appreciate in value. As the dollar continues to be inflated prices are bound to go up. Is that true for this year and maybe the next 2 years, no it is not. I would never buy in an area unless I had solid calculations that the property would appreciate in the coming years.
Thank you Jon for your insight! Ironically enough after I sympathized with Thomas Corso, I was reading multi-family millionaire by Brandon Turner, he hit on a key point about appreciation. You can not rely on appreciation if you are barely cash flowing a property. Focus more on stronger cash flow and less upon appreciation. Jon your interpretation is absolutely correct. You're right, Im wrong, and I apologize for questioning your intelligence. Have a great day!
I care less about being right than providing actual useful information here. Sometimes, I can be overly blunt. I mean no disrespect. I wish you the best. 🙏🏽
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