Inflated Florida market, potential deal??

Question

Hi everyone,

Was pre approved through FHA with the intention of house hacking a duplex. Price inflation has made this process pretty difficult, my window is much smaller based on my cap.  Looking at one in my area (east Volusia County) ran some numbers and would love some feedback! It’s been on and off the market since February 2017 with more than three price reductions since.

2005 stucco cement block duplex/ one side has had recent renovations

Listed  price: 194k

Current rents @ 900/unit

My offer: 160k

Prinipal + interest: 729

Property tax: 147

Home insurance: 75

PMI: 111

Vacancy @ 10% = 180

Repairs @ 5% = 90 (property is practically turn key)

NOI: 468

9.3% cap rate

I’m new to investing and analyzing deals I would appreciate any professional advice

According to my numbers each unit would be 234/unit positive cash flow. I’ve read from other bloggers that if you’re cash flowing at least 200/unit you’re looking pretty good, any thoughts?!?

Thank you!

Charisse Hines · Answer

Thank you @David Schulwitz for taking the time to give me some feedback! I actually didn't even think about CAPEX when running numbers, so great point!

David Schulwitz · Answer

@Charisse Hines

I'm just one opinion, and I'm not in Florida or familiar with your market, but to me I think it looks like a deal.

I think after all expenses have been paid and you've socked away money for repairs, CAPEX, and vacancy, if you can cashflow $100/door (so in your case $200 for the entire property) you're doing pretty well.  So if you're at $234, that's pretty great!  Don't forget to put away a little for CAPEX too though - I didn't see that in your numbers.  Personally for newer properties that shouldn't need a lot of work, I go 4% for repairs, 4% for CAPEX, and 4% for vacancy...but that's just what I've experienced from my rentals - every property and market is different.

When I bought my first couple of duplexes, my main concern was satisfying the "1% rule".  At 900/unit, you'd be "one percenting" if you could get this duplex for $180,000...so if you can get it for 160k, again, I think it's a win!

Continue to analyze, be conservative, but TAKE ACTION - don't get analysis paralysis like most do :)

Good Luck and enjoy the FL sunshine

Dave