Just Bought a Duplex - Need Advice! =)

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Just Bought a Duplex - Need Advice! =)

David W.
Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes

Hello! 

I just got my offer accepted on a duplex in Columbus. I wanted to see if anyone could go over my numbers to confirm they are ok. Have to do a walk through to determine if anything needs work and condition. I will definitely be requesting credits if anything needs fixing as I cannot tweak the numbers anymore. Realtor has claimed turnkey ready so I will hold her to that otherwise I'm canceling. 

Duplex 

$100,0000 purchase price

25% down = $25,000

5.99% 30 year conventional 2 points (but trying to get them to reduce it to 1 point) 


Insurance will be approx $120 (probably less like $110)

Property tax is currently $2300 a year but I put $2500 to be safe.

$30 month for landscaping but for 6 months of the year so comes to $15/mth

Lender said it will be $5316.45 (Title, lender costs $895, origination costs, title insurance $2150, appraisal costs, gov quoting costs), discount point $2271 so I will need approx $30,000 to close. 

Currently, one unit is rented out at $600 and I will immediately send a 30 day notice to inform that rent will be increasing to $650 and they will be in charge of utilities. 

Downstairs is vacant and I will try to get $700 but lets use $650 for more realistic calculation. Rentometer and my realtor have both stated rents are average $650 in the area. 

My property manager will take half month for placement of new tenant.

By the hair of my chin I am getting $200. What does everyone think?  

22Reply
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Tchaka Owen
Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
7y

@David W. - if your property manager can rent for more, that changes the numbers. However, I strongly suggest you don't make a habit of paying more because of competition. Once you work out your numbers on any deal, you stick with it (unless something new is introduced such as higher rents). Why? Because the people you're bidding against might be knuckleheads. Or rookies. Or with a totally different investing strategy. 

29Reply
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  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y

    Does anyone have any thoughts? =)

    3Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 957 votes
    7y

    @David W. this seems very tight to me. If you're OK with a 7.39% CoC return, then go for it.

    It is not a deal I would consider, as 4 months of lost rent on a single unit would wipe out any profits for the entire year.

    You could have your current renter balk at the rent increase and have trouble finding a tenant for the downstairs unit, which could be 2 months of lost rent in that scenario alone.

    16Reply
  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    7y

    @David W. - it's not a bad deal. Here's my lone question: if ARV is $100k and it needs $4k of work, what's the reason you're paying $100k for it?

    17Reply
  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y
    Originally posted by @Tchaka Owen:

    @David W. - it's not a bad deal. Here's my lone question: if ARV is $100k and it needs $4k of work, what's the reason you're paying $100k for it?

     Thanks! Well competition. First 3 properties I put offers in got bought over asking and all cash. So this one got at asking. Got it fast before agent could get the full week if offers. I'm guessing could have been sold for $110k.

    If I can rent out each at $700 per unit. My property manager is confident as I just spoke then that improves my margins! 

    0Reply
  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y
    Originally posted by @Scott Wolf:

    @David W. this seems very tight to me. If you're OK with a 7.39% CoC return, then go for it.

    It is not a deal I would consider, as 4 months of lost rent on a single unit would wipe out any profits for the entire year.

    You could have your current renter balk at the rent increase and have trouble finding a tenant for the downstairs unit, which could be 2 months of lost rent in that scenario alone.

     Hoping to get $700 per unit now as my PM said they are confident about that. So instead of $1300 the $1400 margin improves numbers. Working off of the expectation of $100+ per door 

    0Reply
  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    7y

    @David W. - if your property manager can rent for more, that changes the numbers. However, I strongly suggest you don't make a habit of paying more because of competition. Once you work out your numbers on any deal, you stick with it (unless something new is introduced such as higher rents). Why? Because the people you're bidding against might be knuckleheads. Or rookies. Or with a totally different investing strategy. 

    29Reply
  • Ned J.Pro Member
    Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
    7y

    $200 cash flow for a duplex in Columbus is pretty tight..... not much wiggle room unless you feel like you are playing your numbers very conservatively

    And one unit is already vacant....

    Not feeling it.....

    7Reply
  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    Nope.  Keep looking.  You can do better.  Don't be in a hurry, and don't let the competition push you.  Just keep inspecting.

    25Reply
  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y
    Originally posted by @Marc Winter:

    Nope.  Keep looking.  You can do better.  Don't be in a hurry, and don't let the competition push you.  Just keep inspecting.

    I have but I have not been able to find an ROI 12% plus. This one is looking at 10%. Would be my first investment so would you mind telling me what a realistic roi is and $ per unit goal should be?

    0Reply
  • Tom Shallcross
    Rental Property Investor · Chicago · Member since 2018 · 612 posts · 1k+ votes
    7y

    @David W. - I love the ambition to get in the game, but I agree with most of the forum. If you're excited about 8-10% you're better off putting your 25k towards private lending and not incurring the headaches.  

    Also, if you are not buying at a discount or providing any/much value-add, you don't have a way to create equity and refi our your original 25k.  It's just stuck there and thus it's not a scalable model.  

    A few minor more tactical points -  is the duplex metered where you can even make each tenant pay for water, electric, heat?  Is this the norm in the area for a renter?  Also, Columbus, OH can get about 2 ft of snow per year so run your landscaping costs through the year to cover snow removal.   

    14Reply
  • Albert L.
    Bay Area · Member since 2016 · 82 posts · 55 votes
    7y

    I would recommend checking with your property manager on those rent prices and see how long other properties in the area have taken to get rented out. Keep in mind, it's not the best time of year for new tenants as well so you'll want to factor those vacancy numbers in too

    5Reply
  • Ned J.Pro Member
    Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
    7y

    The place isn't going to cash flow much based on your numbers.....and unless it has a big value add, where you can get the vast majority of your money back out, this isn't a very good deal for that market.

    In a market like CA, it might not be bad since appreciation is in play also....but in Columbus, its not likely to appreciate enough to overcome a weak cash flow.

    Gonna vote to pass unless you can work the purchase down.....don't tweak your numbers to justify it. The pressure to get into the game can make us do stupid things that hurt in the long run

    9Reply
  • Jason L.
    Rental Property Investor · Delray Beach, FL · Member since 2014 · 224 posts · 169 votes
    7y
    Originally posted by @David W.:

    @David W. - it's not a bad deal. Here's my lone question: if ARV is $100k and it needs $4k of work, what's the reason you're paying $100k for it?

     Thanks! Well competition. First 3 properties I put offers in got bought over asking and all cash. So this one got at asking. Got it fast before agent could get the full week if offers. I'm guessing could have been sold for $110k.

    If I can rent out each at $700 per unit. My property manager is confident as I just spoke then that improves my margins! 

     What changed with your property manager's estimate, other than you balking at the original deal? In other words, why wasn't the PM "confident" about $700 back when they told you $650? Not for nothing but the PM is highly incentivized (i.e. they get nothing unless you buy) for you to buy this house. I'd want to know exactly why they are so confident now but weren't when you first asked them. Ask for hard evidence, not just their most recent opinion.

    My long-winded way of telling you to do your own research and rely on that. Go on Zillow/Trulia/Redfin tonight and look at all the comparable 1 bedrooms in your area to make your own determination as to what the unit will rent for. You don't want to be in a situation where you HAVE to rent it for $700 to feel good, but the market is only telling you $650 or less.

    7Reply
  • Tuvia Goldstein
    Developer · Philadelphia, PA · Member since 2019 · 30 posts · 25 votes
    7y

    @David Waddleton

    Flip the contract for 110k if you think the only reason the price didn’t climb that high was because you snatched it up quickly.

    22Reply
  • Adeva Edobor
    Banker · Huntington Beach, CA · Member since 2018 · 99 posts · 100 votes
    7y

    @David Waddleton As someone who just bought my first rental recently, I think the cash flow is too low to consider this a deal. I would recommend that you be patient and keep shopping. You can definitely find something better. You're going to make mistakes on your first deal but this is too much of a risk.

    8Reply
  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y
    Originally posted by @Jason L.:
    Originally posted by @David W.:
    Originally posted by @Tchaka Owen:

    @David W. - it's not a bad deal. Here's my lone question: if ARV is $100k and it needs $4k of work, what's the reason you're paying $100k for it?

     Thanks! Well competition. First 3 properties I put offers in got bought over asking and all cash. So this one got at asking. Got it fast before agent could get the full week if offers. I'm guessing could have been sold for $110k.

    If I can rent out each at $700 per unit. My property manager is confident as I just spoke then that improves my margins! 

     What changed with your property manager's estimate, other than you balking at the original deal? In other words, why wasn't the PM "confident" about $700 back when they told you $650? Not for nothing but the PM is highly incentivized (i.e. they get nothing unless you buy) for you to buy this house. I'd want to know exactly why they are so confident now but weren't when you first asked them. Ask for hard evidence, not just their most recent opinion.

    My long-winded way of telling you to do your own research and rely on that. Go on Zillow/Trulia/Redfin tonight and look at all the comparable 1 bedrooms in your area to make your own determination as to what the unit will rent for. You don't want to be in a situation where you HAVE to rent it for $700 to feel good, but the market is only telling you $650 or less.

    It was the realtor that said that but said of course it varies depending on the condition and we have to do a walk through and inspection. I spoke to my property manager and they said $700 is a fair price and again depending on condition could be between $675 and $725. I did check rentometer and trulia and it is accurate from what I see that the average is $700 in the area. 

    I also am working on getting a 5.75% 30 year fixed so that will also help with my end. with recalculating it shows now about 10.8% ROI.

    If this is too risky then what is an example of good property numbers? 

    0Reply
  • Rongsu Qi
    Rental Property Investor · Orlando, FL · Member since 2017 · 34 posts · 8 votes
    7y

    I just started investing last year and bought a SFR in the Orlando suburb area for around 8-10% cap rate. That is nearly impossible to find in the area, at least off of the MLS.

    Question to the experienced investor here: Since Orlando is considered an appreciation market, with a yearly appreciation of 6-10%, does it change your opinion about taking the 8-10 cap deal?

    0Reply
  • Jason L.
    Rental Property Investor · Delray Beach, FL · Member since 2014 · 224 posts · 169 votes
    7y
    Originally posted by @David W.:
    Originally posted by @Jason L.:
    Originally posted by @David W.:
    Originally posted by @Tchaka Owen:

    @David W. - it's not a bad deal. Here's my lone question: if ARV is $100k and it needs $4k of work, what's the reason you're paying $100k for it?

     Thanks! Well competition. First 3 properties I put offers in got bought over asking and all cash. So this one got at asking. Got it fast before agent could get the full week if offers. I'm guessing could have been sold for $110k.

    If I can rent out each at $700 per unit. My property manager is confident as I just spoke then that improves my margins! 

     What changed with your property manager's estimate, other than you balking at the original deal? In other words, why wasn't the PM "confident" about $700 back when they told you $650? Not for nothing but the PM is highly incentivized (i.e. they get nothing unless you buy) for you to buy this house. I'd want to know exactly why they are so confident now but weren't when you first asked them. Ask for hard evidence, not just their most recent opinion.

    My long-winded way of telling you to do your own research and rely on that. Go on Zillow/Trulia/Redfin tonight and look at all the comparable 1 bedrooms in your area to make your own determination as to what the unit will rent for. You don't want to be in a situation where you HAVE to rent it for $700 to feel good, but the market is only telling you $650 or less.

    It was the realtor that said that but said of course it varies depending on the condition and we have to do a walk through and inspection. I spoke to my property manager and they said $700 is a fair price and again depending on condition could be between $675 and $725. I did check rentometer and trulia and it is accurate from what I see that the average is $700 in the area. 

    I also am working on getting a 5.75% 30 year fixed so that will also help with my end. with recalculating it shows now about 10.8% ROI.

    If this is too risky then what is an example of good property numbers? 

    People focus too much on this forum on "rules" and minimum thresholds to the point of the very same analysis paralysis you're currently having. There's no one-size-fits-all approach to investing (in anything): beauty is in the eye of the beholder. If you like it, then buy it!

    However, I'll leave you with this: you shouldn't have to squint to see if you like it.

    15Reply
  • Amit P.
    Las Vegas, NV · Member since 2018 · 49 posts · 40 votes
    7y
    @David Waddleton I locked in with Chase on 2 duplexes this week at 5.125%, no points, 30 year fixed. You can do better on your rates which should help your numbers.
    8Reply
  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y
    Originally posted by @Amit P.:
    @David Waddleton

    I locked in with Chase on 2 duplexes this week at 5.125%, no points, 30 year fixed. You can do better on your rates which should help your numbers.

     Chase Bank gave you that? 

    0Reply
  • Michael T.
    Los Angeles, CA · Member since 2018 · 326 posts · 279 votes
    7y

    @David W. my friend!  The deal is not bad, however, similar to others I'd like to get a little more in cash flow per month.  If you can get rent to $700 per unit and your rate down to 5.4% then you're getting $150 per unit per month.

    Some of the national banks such as Chase Bank, Wells Fargo and US Bank are trying hard to compete right now with investors since there is not as much opportunity from a refinance perspective.  I'll send you the name of a US Bank guy here in Southern California that may be able to assist in the process as well.

    For a lot of my SFR's I try to target approximately 15% IRR.

    If it's turnkey ready and no renovations or repairs are required then you're not too far off if you can get a little more in rent and a lower rate. 

    5Reply
  • Chris Sukala
    Rockford, IL · Member since 2015 · 343 posts · 95 votes
    7y

    @David Waddleton landscaping seems a bit low also. I pay one duplex 25 a week for mowing and another 35 a week for mowing. Different market but still seems low

    1Reply
  • Jared Smith
    Real Estate Broker · Scottsdale AZ & Cleveland, OH · Member since 2019 · 168 posts · 109 votes
    7y

    @David Waddleton great start but I would start to build relationships for every part of the business. For example my lender got me 5.5% in Cleveland, OH for an investment property with no points, 30 yr fixed. Happy to help, just DM me.

    -Jared

    3Reply
  • Jared Smith
    Real Estate Broker · Scottsdale AZ & Cleveland, OH · Member since 2019 · 168 posts · 109 votes
    7y

    @Tchaka Owen great advice. I only buy where I know and I am unemotional on deals. I do have a caveat that if I wouldn’t live there myself I wouldn’t buy it but that’s just me. I prefer Class A and B properties and steer away from CMHA section 8.

    6Reply
  • Jared Smith
    Real Estate Broker · Scottsdale AZ & Cleveland, OH · Member since 2019 · 168 posts · 109 votes
    7y

    @Ned J. I have a lot of college friends that live in Columbus and if it’s German village or short north it could be worth it but the price tags are steeper. There are great pockets and neighborhoods but you have to know the market.

    0Reply
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