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?  

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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. 

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  • Matt P.
    Investor · Columbus, OH · Member since 2015 · 625 posts · 601 votes
    7y

    @Roshan K. You never know until you try ;) but it sounds like you dont need my help. If your using products like what you referenced above we aren't even talking about the same thing anyway lol. Those certainly aren't traditional mortgage loans. Good luck.

    2Reply
  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y

    Update: So I just received the lease agreement and the tenant above is actually paying $700/mth and is in charge of all utilities which is a positive thing as that means it is more realistic to rent downstairs out at the same. 

    I also received inspection report and it does look like a lot of repairs but will be asking for credit or repairs completed. If agent says no then I cancel. 

    4Reply
  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    7y

    What kind of repairs are needed? If it's anything expensive this deal is busted. 

    99% of time a seller won't agree to replace (or credit) the roof, furnace, or any mechanical system. 

    Either way it's a lesson learned! I'd guess you would only be out the inspection and appraisal fees. 

    1Reply
  • Spencer Hogan
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 15 posts · 15 votes
    7y

    @David W.

    Hope this helps. Good luck!

    2Reply
  • Kevin Hurtuk
    Rental Property Investor · Fairview Park, OH · Member since 2015 · 7 posts · 5 votes
    7y

    This deal seems decent to me.  My first deal was a duplex that brought in $275 per door with 22.5% cash on cash return in Cleveland.  This is with me self-managing, so I am not factoring in an 8-10% mgmt fee as you are.  My numbers would be around $200/16.7% with mgmt.

    It really depends what you want out of your investment/what you're willing to do to get it.  In order for me to get this deal I had to do a ton of rehab to the house myself to keep costs down and being in the area I can manage myself.  You are not able to do either of these things being out of state, so you really can't expect the same return when buying at MV.  But, you also won't have to complete a heavy rehab OR have to deal with any tenant problems as you will be paying someone to take those issues off your plate

    I think its a decent first deal to start out with, and learning through doing is the best kind of education... if you find yourself wishing you had gotten a better deal just aim higher for the next one.  Good luck!

    2Reply
  • Jian G.
    Rental Property Investor · San Diego, CA · Member since 2019 · 102 posts · 43 votes
    7y

    @David Waddleton

    Not enough return and all the profit will be gone with some bad tenant or vacancy

    1Reply
  • Konstantin Boubev
    Rental Property Investor · Howard Beach, NY · Member since 2017 · 52 posts · 28 votes
    7y

    I'm sure that you can find a better deal. Establish clear permitters, and keep looking until you are able meet them.

    There are ways you can make this deal work better, but not worth it. 

    No substantial cash flow

    No substantial value  gain at purchasing 

    3Reply
  • Doug Burrell
    Member since 2018 · 9 posts · 3 votes
    7y

    @David Waddleton David if this was a good deal the bank would be giving you a really good deal on a loan from what I can see they think it's a bit risky so they're protecting themselves. Seems like you're starting out over-leveraged I like someone else said your cash on cash return isn't that great.must have some future location opportunity or something that you haven't disclosed walk away and find a better deal.

    1Reply
  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y
    Originally posted by @Doug Burrell:

    @David Waddleton David if this was a good deal the bank would be giving you a really good deal on a loan from what I can see they think it's a bit risky so they're protecting themselves. Seems like you're starting out over-leveraged I like someone else said your cash on cash return isn't that great.must have some future location opportunity or something that you haven't disclosed walk away and find a better deal.

     hmm they don't know anything about the property and the rate I got was prior to giving them the property address from what I recall.

    0Reply
  • 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.

    what ROI do you look for or are happy to get?

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

    @David Waddleton what made you decide on Columbus? I would recommend Mesa, AZ and Cleveland OH.

     Cleveland's population is decreasing while Columbus is increasing and has a strong economy, school, sports, tech etc. Just what I have researched =)

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

    Basically what everyone else had said. What is your current RE strategy? Is it just cash flow? Value-add? BRRRR? How long is it going to take you to raise another $30k? By the way, you haven't "bought" this duplex yet (thank God).

     My current strategy is to cash flow and reinvest and build equity. I am in LA where properties are a million and are so over inflated I am in awe of how wealthy some people are they don't care if the property makes sense or not. 

    So cash flow and I would love to BRRRR in LA but can't find a thing

    1Reply
  • Michael Ryan
    Investor · Cleveland, OH · Member since 2017 · 9 posts · 7 votes
    7y

    @David Waddleton

    I have your monthly maintenance and cap ex calculations low. I like to put away at least 7% for each unless you've got cash already put away (like $5,000) for problems that may come up and then 5% could be ok; 7% for each would decrease your CoC return by an additional $52 per month, taking you under $100 a door. Be careful not to over leverage, especially when you don't have equity in the property.

    1Reply
  • Spencer Cornelia
    Investor · Las Vegas, NV · Member since 2017 · 321 posts · 524 votes
    7y

    I love how everyone just jumps in and inputs what they think is best for a stranger they've never met.  @David W. unless you've met any of the people commenting in here, I wouldn't listen.  Listen to the input on running numbers but not on whether you should buy or not.  Only you know what's best for you.  It looks like we all agree that you ran your numbers in a very solid way and we can see that you are getting a very solid 7+% return.

    If you like that return and it aligns with your goals, then buy it man.  Getting in the game is way better than sitting on the sidelines (which most people will do for years).

    5Reply
  • Michael Durham
    Rental Property Investor · Salt Lake City, UT · Member since 2018 · 11 posts · 19 votes
    7y

    I don't understand everyone's obsession with duplexes. I could see it if the cash flow was dramatically more but, if you're using a management company, you're not adding to your own management workload. Why not just buy 2 houses for the same price of one duplex? I would imagine vacancy rates are lower in SFR too since they are more desirable to live in than a duplex. (just my unprofessional hunch) Serious question, not rhetorical as I might just be missing some key benefit.

    1Reply
  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y
    Originally posted by @Tom Shallcross:

    @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.   

     Hey @Tom Shallcross so I have confirmed that the top is renting for $700 and bottom unit is being remodeled prior to closing. I read the lease agreement for up top that signed a 1 year Dec 1, 2018 for $700/mth and is responsible for all utilities, water, power, gas. City is responsible for snow removal and so I will rent out the bottom for $700. PM and another PM I talked to both said that they rent out very fast in that area and said a 2 week turn around to get the bottom rented. 

    I am in the process of securing a 5.75% with no points and total closing costs $3500. This makes my margins look a lot better and am towards 11% ROI. Not stellar but what do you think?

    2Reply
  • 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.

     @amit P so you got Chase bank loan for Ohio at 5.125% no points?!

    0Reply
  • Kenny Buyers
    Rental Property Investor · Dallas, Fort Worth · Member since 2018 · 9 posts · 5 votes
    7y

    Hey David, I see some of the concerns others have voiced but I feel like you have done a lot of good research on the property and area. To me it seems like a solid first deal. If you get $700 for both doors that's $1,400/mth which definitely beats the the 1% rule. I think if you secure a better rate and they credit you a fair amount for the repairs then I would be pleased with this deal. Best of luck!!

    3Reply
  • Hai Loc
    Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
    7y
    Originally posted by @Matt P.:

    Wow I just read through the thread. People who are saying a duplex bought for 100k that rents for 650 a month is a good or even decent deal are crazy IMO. Feel free to PM me if you want some impartial advice from someone who is operating in central Ohio.

    You sure its not $650 per side?  $325 per side sounds like D class all day

    0Reply
  • Hai Loc
    Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
    7y

    So hard to find a deal in Columbus.. Only deal I ever got was buying a few tenant home mobile homes for $1200 a piece and rented them out for $600 after about $500 of work on each one.. Generating about $800 a month net after paying $2200 for them..

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

    @David W. I'm glad you're taking action and at pursuing something which is better than nothing!

    0Reply
  • William C.
    Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes
    7y

    @Hai Loc where on earth are more deals like that?

    0Reply
  • William C.
    Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes
    7y

    @David Waddleton. Am I reading this post of yours correctly? I can’t see to quote from my phone but I pasted part of it below. The unit is being renovated prior to settlement? As in the current owner is going to invest into the property, after it’s under contract and before he transfers ownership? Sign me up! Another question I have after reading through this thread is, who is your boots on the ground? An agent? Sounded a few times like the property manager is selling you on higher rents and renting it out quickly. Wasn’t sure who’s all involved since your out of town. Have you seen the inside yet? Your OP and your location tell me you bought sight unseen. As others have said, bravo for jumping into the deep end, and coming here to get some helpful advice, it’s time to sink or swim. Best of luck either way!

     Hey @Tom Shallcross so I have confirmed that the top is renting for $700 and bottom unit is being remodeled prior to closing. I read the lease agreement for up top that signed a 1 year Dec 1, 2018 for $700/mth and.........

    1Reply
  • CJ Hamlin
    Developer · FL · Member since 2018 · 26 posts · 16 votes
    7y

    @David W. All of the comments/advice that you have here is very good and worth considering. Hopefully you are still in the inspection or due diligence phase...

    You are definitely on the road now. Getting this far with an investment is great. **If your first deal becomes an anchor and a stress, this can really be discouraging so do your very best to maximize all of your numbers. On the other hand, a great first deal/investment can be like rocket fuel! 

    Overall, congrats on taking the initial steps!

    0Reply
  • Nii Okai
    Real Estate Agent · Clinton, MD · Member since 2009 · 54 posts · 18 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.

    0Reply
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