Is this a good deal for me?

Question

In attemting to find my daughter off campus housing at an expensive school I came across a Duplex that seems to be a good deal for an investment rental . I would love your thoughts. Here are the numbers.

Cost 110k    ARV is 130

Both sides are 3/2 and rent for 725 each. Did a visual walk through with agent and nothing stood out as a major issue. Roof and foundation no visible issues.Both sides are rented and families want to stay and seem stable(2 years plus). Nothing needs to be done to keep them rented. Metered seperatly at tenants expense.

Rent Roll 1450

Motgage 496

Property manager 142

Vacancy 8% 114

Repairs 5% 71

Expenses - 200 includes Insurance and Property tax.

Cash Flow $402

Cash on Cash is 15% if I figure I am in 32K after 25% doen payment and loan fees.

Market rent is $800-850 if I wanted to do moderate improvements.

Plan is to make offer and do inspection. If nothing too extensive comes back is this a good deal?

Sam LLoyd · Answer

The only thing I would look more closely at is the repair budget.  I've been using 5% for a while, but that's because I do all the work myself.  So, that's only the materials.  And.... I've found that it is a bit low.  I don't know what repair costs are in TX, but that's the one number that has me worried.  Other than that, if you are comfortable with the neighborhood, it looks good to me.

Shayan S. · Answer

Hey Douglas,

It seems that you did not list a capex? Capex is the money you put aside each month for future big purchases such as a roof or new appliances. The age and condition of the home usually determines how much money you want to put aside for capex each month. Let's use 10% as an example because it's what a lot of investors on BP have used. So if you put aside 10% of the rent that's 145 a month. This'll bring your cashflow to 257 per month. Which is a 9.6% CoC return, which is not a bad return. However I wouldn't be comfortable with 257 per month, what if something major happens?

Shayan Soltanian