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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  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y
    Originally posted by @William C.:

    @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.........


    @William C. yes they are actually getting the bottom unit fixed up so it is move in ready. My agent said "we will see about that" so of course I have time to get out if they don't. I have received the 1 year lease that is signed Dec 1, 18 for $700/mth with all utilities the responsibility of the tenant. I am going to assume the bottom unit will be in better condition then the currently occupied so it will be safe to expect $700 as well below. 

    Yes the property manager did say that is a fast renting area, at some point I have to either trust or dont trust them. My agent has 10 investment properties of his own and are managed by them. I understand there is an alliance there but I would rather use a recommended PM then go out into the cold and find one myself and hope for the best. 


    I have not seen the inside yet as that is part of my rule that if I don't see then I don't continue. My agent is going to do a video walk through for me 

    Yes buying site unseen. I am in LA unfortunately not loaded so have to go where I can afford. I did a lot of reading and listening to podcasts and talked to people. i.e. out of state investing book. So hope for the best. 

    My goal is at least 12% ROI and this one by the numbers (thats all I have for now) is there.

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

    @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!

    @CJ Hamlin thanks and yes I am hoping that this will be ok. I don't know how else to find a better return at this time. I haven't turned over every rock of course but just keep coming up with under 10% ROI so I ended up doing this one which is on paper with $1400 rents at approx 11%

    0Reply
  • Nii Okai
    Real Estate Agent · Clinton, MD · Member since 2009 · 54 posts · 18 votes
    7y

    I agree with @Mark Winters ... 

    I understand you are anxious to have a deal under your belt, but this is not it. Wait for the real deal. Be not in a hurry. Continue looking.

    On this one, the numbers are too tight. It is an aligator deal.

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

    @David W. brings up around the bottom unit is being remodeled prior to closing.  I'm not following why the seller is doing this after you've agreed upon a price.

    Also a quick Google search shows the city takes care of snow removal for the streets but you will need to pay your property manager or a third party to shovel the sidewalk.  Columbus doesn't issue an ordinance for this but as a landlord you can potentially put yourself in a messy situation if your tenant falls on the property due to your negligence of removal. 

    The snow removal is a small item, but the fact that you blindly accepted what the PM said without doing a quick fact check concerns me that maybe you are blindly accepting some of the other items talked about on this thread (now getting $700/rent, utilities included, bottom floor being renovated).  Feel free to DM me if you want to discuss, I don't want to rain on your parade nor do I have all the info on this deal, but just trying to help avoid any pitfalls. 

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

    @David W. - I have the same question @William C. brings up around the bottom unit is being remodeled prior to closing.  I'm not following why the seller is doing this after you've agreed upon a price.

    Also a quick Google search shows the city takes care of snow removal for the streets but you will need to pay your property manager or a third party to shovel the sidewalk.  Columbus doesn't issue an ordinance for this but as a landlord you can potentially put yourself in a messy situation if your tenant falls on the property due to your negligence of removal. 

    The snow removal is a small item, but the fact that you blindly accepted what the PM said without doing a quick fact check concerns me that maybe you are blindly accepting some of the other items talked about on this thread (now getting $700/rent, utilities included, bottom floor being renovated).  Feel free to DM me if you want to discuss, I don't want to rain on your parade nor do I have all the info on this deal, but just trying to help avoid any pitfalls. 

     @Tom Shallcross I agree with you that some points have fallen through the cracks. Mostly due to the fact that this is my first potential transaction and the process is happening very very fast. 

    0Reply
  • Farris Gosea
    Rental Property Investor · Member since 2018 · 46 posts · 11 votes
    7y

    Wow, I would not do this deal at all. This is not very good cash on cash, after leverage returns on real estate should be somewhere between 15 and 25% not 7%. I would be scared and also, if your right there, DO NOT waste money on a property manager. Do it yourself. Its 2 units not 200

    0Reply
  • Richie Davis
    Rental Property Investor · Enterprise, AL · Member since 2017 · 9 posts · 5 votes
    7y

    Don't fall in love with a property. If you are trying to make it a good deal off the hair on your chin then it probably isn't a good deal. You have plenty of money to put down and if you are already planning on using a property manager... invest elsewhere! You should calculate on the conservative side vs stretching and trying to find numbers that will work. You will lose money on this deal if everything doesn't work just like you planned. Play it safe and save yourself a lesson from the school of hard knocks!

    0Reply
  • Steve Graves
    Rental Property Investor · Lancaster, CA · Member since 2015 · 103 posts · 55 votes
    7y

    If you're comfortable with your numbers then buy it. Your first investment will teach you many lessons. 

    1Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    What good is taking action and getting over analysis paralysis only to buy a marginal deal that doesn’t hardly cash flow much . This is the Midwest bro not Cali !you oughta be getting several hundred dollars a door and hitting the 2% rule . Why are you talking yourself into this property when we’ve all told you it’s not that great ? I can see Your buying wrong and your calculations are way too conservative across the board . Wait till you get bills left and right and that pm hits you with all their fees . If you spend over 100k in the Midwest you should be seeing great returns but I’m just not seeing that here. I’d walk

    2Reply
  • Wesley WhiteheadPro Member
    Rental Property Investor · Depends on where my employer sends me · Member since 2018 · 171 posts · 142 votes
    7y

    @David Waddleton First of all kudos for going on out making it happen. I guess the question is how comfortable are you with the numbers. I would aim to for closer to 90K and look to charge $700/month per unit but that’s me.

    0Reply
  • Nicholas M.
    Contractor · Totowa, NJ · Member since 2018 · 29 posts · 12 votes
    7y

    @David Waddleton

    Does anyone see why he shouldn’t partner up, find a better bank rate and maybe put down say 30% split. If this is a long term investment this will be the first of many properties you will buy. You’ll get 50% equity and if your close you can split the PM responsibilities with a partner. Get your hands dirty get experience you can’t buy.

    Or what someone just offered me which was 42.5% equity across the board for 50% of the down payment. You could manage and your fee is 7.5% on the deal. You have 57.5% equity. Less out of your pocket and money for the next deal. Still get a better loan. Build your empire slow and with a strong foundation.

    0Reply
  • Daniel Sullivan
    Member since 2019 · 4 posts · 2 votes
    7y

    @David Waddleton

    If they rented for 800 a piece I would have done the deal . 650 is too low , not enough cash flow. If I were you I’d try to just get in the game with a SFU for around 30 k that rents for 650 or maybe a 50k sfu that rents for 800 and you’ll be in a better position You don’t want to raise rental prices higher than what the market bares because you can increase your vacancy’s .

    0Reply
  • Daniel Sullivan
    Member since 2019 · 4 posts · 2 votes
    7y

    @Rongsu Qi

    I always make sure my cash flow numbers work accordingly to what I want. On - yearly average I’ll net around 300$ per month per sfu . If it goes up in value that’s just a bonus . Don’t ever focus on if it goes up in value , that is what gets people in trouble .

    0Reply
  • Ron Fletcher
    Leclaire, IA · Member since 2016 · 161 posts · 130 votes
    7y

    @David Waddleton

    Absolutely don’t raise the rent on occupied unit until you get other one rented. It’s

    Only then that you will know market value for rent. Both sides empty is no fun. You also need to figure that almost all properties have some deferred maintenance, sometimes unseen that will suddenly appear after closing that you should be prepared for. This deal is lean unless you can add value somewhere and pop the rents.

    0Reply
  • Emy Bernardo
    Investor · San Diego, CA · Member since 2017 · 112 posts · 92 votes
    7y

    @David Waddleton - I live on So-Cal too and it's easy for people to say to "look for something closer to home" - anyone that lives in LA or San Diego that wants to get into their first deal w/ 100k needs to look far from home! We purchased a SFR from a turn key provider in Middletown, OH (just outside of Cincy). Your numbers are just as good - if not better - than the numbers that these providers use in their pro-formas for the turn key properties they sell. Ohio is a stable market and land-lord friendly. I'd say it a good first deal if the seller will agree to the repairs that you request. You never know the seller's situation; I don't agree with the negative advice that sellers don't agree to do major repairs. You may end up getting a nice credit or reduction in price (hopefully, you have some reserves to pay for the repairs out of pocket).

    My only advice is to fly out there and look at the property in person - if you can go out there for the inspection that is ideal.  You want to see the neighborhood, surrounding properties, meet your PM in person, take her out for lunch or coffee.  You definitely want to be more than the investor from California to her.   It's SO hard to find a good PM - I have yet to find one.  This can really make or break your success.   We made the mistake of trusting our PM on a duplex in San Antonio we owned.  When we made a visit after many years under their management, we found all sorts of issues that could have been prevented if the tenant had reported them earlier (rotting floors from leaky toilet, etc.)  If you can't fly out, make sure you get inspections at least once a year by the PM to make sure the tenants are taking care of the place (reporting leaks, changing air filters, etc).  Good luck!!!

    1Reply
  • Scott Sklare
    Real Estate Broker · Beloit, WI · Member since 2015 · 232 posts · 60 votes
    7y

    I would be happy to, give me a call.

    0Reply
  • Al Pat
    Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
    7y

    @David Waddleton Don’t ever let competition derail your budget. Stick to your numbers. You will be tight on money with this deal. Water heat goes out and there goes your $1500.

    Don't just buy property to call yourself a landlord. My mutual funds and ETFs are returning 9% YTD this year, okay not for the last year but I wouldn't buy a headache for mere 8% COC. I don't have a single property that has return that low. All of mine are in excess of 25% return.

    I need at least $300 per door per month at minimum before I even make an offer.

    0Reply
  • Joe P.
    Philadelphia, PA · Member since 2017 · 824 posts · 1k+ votes
    7y

    I checked the calculator, and you've budgeted $65 for vacancy, CAPEX, and repairs? To the tune of $780 per month for each.

    Here is why that is flawed in my extremely limited experience.

    • Your monthly rent will be $650 or $700 per unit. That means you've budgeted for a little over one month of vacancy between both units for the year. Ouch. Based on what you've said you'll be hosed on that pretty quick.
    • CAPEX and Maintenance are budgeted at $780, each. The deal I got in August was very similar to yours except my monthly rent is $1900 between both units. To date...6 months...I've used 120% of my CAPEX budget (originally was $2280) and 150% of my maintenance budget (originally was $1820).

    Now I also budgeted $0 on entry for any repairs, so theoretically I could have set some money aside, perhaps $2000 to $3000 to make it look like my cash flow is better. But a roof on a townhome is going to be about the same cost (size depending) regardless of if the property is worth 30k or 300k. A stove or a refrigerator (both unexpectedly needing to be purchased) will run you $400 regardless of whether a property is worth 30k or 300k.

    If you blow your budget on one purchase, how can you expect to ever make money on this deal? I understand you're putting money in up front for repairs and theoretically this should lower your need to tap into CAPEX and maintenance budgets. But over time? I think you're way under budget on those. It looks good now but it is tight.

    I thought "man, almost $4,000 a year saved up for CAPEX and maintenance? I'm going to be rolling in it!" Yeah...no. Maybe next year, but even being at 150% on my maintenance budget 6 months into my fiscal year scares the hell out of me.

    1Reply
  • Matthew Gromadzki
    Realtor · Miami, FL · Member since 2019 · 1 post · 0 votes
    7y

    It's a nice investment. 7.4 % Cash on hand is a great return given that the duplex price is only $100,000. I just found a duplex for my client in Edgewater Miami for $224,900. Currently rented for $2,000 total for 2 units.

    0Reply
  • Todd Murphy
    Investor · Indianapolis, IN · Member since 2018 · 63 posts · 55 votes
    7y

    @David Waddleton Congratulations on your first! Action step like this was crucial to my start, but now you have to make the deal work for you.

    My first duplex last year we were up against multiple offers.

    Be patient and ensure the projected numbers are enough to withstand all the things that could bring those down after acquisition.

    My second deal was better than the first by applying lessons from the first.

    Great first step and keep learning.

    All the best!

    0Reply
  • Daniel Rivera
    Somerset, NJ · Member since 2016 · 33 posts · 13 votes
    7y

    @David W. congrats on putting in an offer and making moves. I've been a slave to analysis paralysis myself for far too long, and finally putting in offers that have been getting rejected, but I know I would be questioning myself the same way you are if one of my offers got accepted. I notice you have the same questions I have had regarding whats a good CoC ROI or cash/door. This is an answer I've had to come up with myself regarding what I feel is comfortable for me-one thing I will say is I've set a goal of at least 12-15% given that I could get 8% on average (and have been fortunate enough to have gotten more like 15% over the last few years) simply putting my money in the stock market and not having to worry about it. Now thats not to say that I wouldn't lower that standard to say 10-12% just go get in the game and gain experience, but I'd say so far I've let a lot of properties go by that were <10% since setting my goal above. I think thats been one of the most helpful things I've done since starting to analyze deals. Now, take this with a grain of salt as this is coming from somebody who is yet to close a property, but I hope this is helpful and encouraging for you nonetheless. Wishing you all the best!

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

    @Emy Bernardo I don’t know where you saw negative comments regarding the seller making repairs, but I certainly had to clarify if that’s what was actually happening. You are right when you say sellers will make repairs prior to settlement all the time. I have just never seen a situation like this. Typically they make repairs that were asked for due to a home inspection. It looks like this seller advertised “remodeling” the unit before closing. I would just want more clarity on what exactly this means. If they mean turning the unit over to make it rent ready, ok that makes perfect sense. But for a seller to just offer to remodel units prior to settlement seems like a red flag to me, or at least something to get absolute clarity on. It’s likely they are not putting much, of any money into it, other than maybe some labor to clean and repaint wherever needed. But if they were planning on spending, I’d negotiate to get a credit instead. Then you can control the remodel. Who knows who is doing the work and what kind of work they are doing. For example I’m dealing with frozen pipes from when a shoddy contractor never insulated water lines years ago running up an exterior wall. Remember your stuck with any and all issues moving forward, so you really want to make sure you know exactly what is being done to the property.

    0Reply
  • Emy Bernardo
    Investor · San Diego, CA · Member since 2017 · 112 posts · 92 votes
    7y

    @William C.   I was referring to an earlier post that mentioned 99% of sellers won't agree to major repairs.   We recently purchased a duplex in Idaho and the seller agreed to a large credit for the roof replacement.  He was  under a tight timeline doing a reverse 1031 exchange - my point is you never know the sellers situation, so always ask before you through the deal away. 

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  • Tony H.
    Rental Property Investor · Montgomery, IL · Member since 2018 · 13 posts · 5 votes
    7y

    @David W. is right. The stock market is zero work for a 7% average return.  I'm not in the stock market but that is where I am leaning.   I am also stuck on the numbers thing but lean toward what Daniel is saying.  This property is more time than you know.  Not saying it isn't worth it.  But I disagree with " Good job on your first deal".  I guess I can tell that to all the investors in 2006, as that is how I got all my deals.  Good example, just last week closed on a sale of a commercial building I was 15% partner in.  Bought it 20 years ago for 1 million, so 30k down.  I put in $64,000 over the years for repairs, vacancies, etc.  Sold for 1.4 million.  I received check for 74k.  Pretty good?  LOT of fees for realtors, title, survey, etc, etc. also. 

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

    @Emy Bernardo well then you are right, that stat is 99% incorrect. Iv been apart of over 100 deals and roughly 1% of them had a buyer ask a seller for repairs that they refused. In every other case the seller was willing to make repairs the buyer requested. Every situation is different, so to throw a blanket statement out that buyers don’t make repairs is just flat out false and not helping anyone in this thread. The fact that these “repairs” were promised before any type of inspections or even requests just sounds out of the norm, hit again, not entirely impossible.

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