Am I getting in over my head?!?

1 Reply

Help! I am a newb when it comes to real estate investing. A family member came to me recently, knowing that I am looking to get into REI. He is selling a property in a rural area about an hour and a half northwest of Detroit. This property is on 10 acres and has two duplexes on it. His original plan was to develop the other 8 or so acres, but is getting older now and doesn't want to put in the effort of developing the properties. Here are some numbers on it, Revenues: Two upper units rent: $710/month Two lower units rent: $660/month Each unit has an external garage that rent: $50/month Total - $2940/month Expenses: Taxes: $6140/year Insurance: $1200/year Utilities: Well and septic. Electric, propane gas and cable (available @ tenant's expense) It was completely renovated in 2001. New roofs, new windows, new 90% efficiency propane forced air furnaces, new sinks and counter-tops and new carpet throughout. Sale price: $275,000 Land contract available, with appx. 40% down Is this something I should look into? Are there other figures that I should know about? Thanks, Steve

Well, ok. Let's look at your numbers...

Monthly Gross income: $2940

Monthly Expenses:
Taxes: $6140 / 12 = $512
Insurance: $1200 / 12 = $100

So, my first question is:

Electric - does each unit have its own meter plus one for each building?
If so, do you have detail on electrical expenses for the building?
Does that detail include the well pump(s)?

What about maintenance expenses for the septic system and well pump(s)?

You'll want each building broken out separately, then look at the finances of the land purchase for the rest of the property.

There will be more work to do from there, but that at least presents some idea about the compexities of what you're considering.

Find someone locally who can mentor you with this.

I have a saying, also: Learn how to do real estate before you try to do real estate.

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