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 @Tony H.:

    @David W. I own 16 properties, mostly single family, that I was lucky enough to swoop up in 2008-2010 in foreclosure time. All at ridiculously low prices.  This site has helped me to realize the true costs and expenses because I didn't know crap.  I knew I bought the properties at the right price, and that is the name of the game.  The number's don't lie.  I have been trying to buy something for a while now but there is nothing out there worth it.  @Daniel Rivera 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. 

     Thanks. Honestly I'm not feeling excited about this. I put in request to fix everything that the inspector found, literally everything so I'm sure they will say no. Then in that case I will back out. 

    I wish I had my money back then! Congrats on getting in at such a perfect time.

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

    I know I'm new to RE investing but I'm shocked by so many replies about the stock market making 7% return with no work. What about the three different incomes from Real Estate that BP has been preaching?  1) Cash flow 2) Appreciation 3) Loan pay down. 

    The stock market can only give you appreciation and maybe cash flow if you invest in dividend-yielding equities . And both are completely out of your control. For these reasons, wouldn't you want to invest in RE over the stock market even with the same cash on cash return? Oh and next year when your rent increases by 5% and your mortgage stays the same, your 8% deal likely becomes 10%. Stock market can't do that either. 

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

    @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!

     Thank you Daniel. Random question. When I want to reply to you do I press quote or do I say @Daniel Rivera ? 

    You remind me along with everyone that although I'm taking action I shouldn't flex from my goal. Just finally got my offer accepted which seems to be a miracle in itself. A bit in awe how people have 20 50 100 units lol.

    1Reply
  • Pete Voss
    Green Bay, WI · Member since 2017 · 9 posts · 2 votes
    7y

    @David Waddleton

    You’re eager to invest and it shows. I like your drive.

    My question is “have you requested the current tennant’s lease?”

    “Is the current tenant under a lease?”

    If so, you will have to honor that lease until it expires. I have been reading the thread and haven’t seen these questions yet.

    Also, be wary of increasing rents without adding value to your tenants otherwise you may end up with 100% vacancy and a less than reputable image as a landlord.

    0Reply
  • Rongsu Qi
    Rental Property Investor · Orlando, FL · Member since 2017 · 34 posts · 8 votes
    7y
    Thanks for that reminder. It's precisely the reason I did not buy a single property in the SF Bay Area where I live and work. In the end of 2017, I saw a nice Townhouse in downtown San Jose which sold for 1.07 M, then immediately listed for rent. It was listed for $5350/month initially, and didn't rent out until 4.5 months later at $3980. Appreciation has worked out so well over the past years in the Bay Area that this buyer was willing to either bleed ~ $1500 a month (if he got a mortgage), or take a sub 4% cash on cash return (if he paid all cash), to bet on prices going up!

    That's when my husband and I said no, and moved to Florida.  

    Originally posted by @Daniel Sullivan:

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

    @Rongsu Qi In the stock market you don't have evictions, unexpected repairs, unexpected bills, sleepless nights, ruined plans, etc.  Like others have said, ultimately it is up to you for what you are looking for.  If you are happy with the numbers then go for it.  Personally, I am following this thread because I am looking for that magical formula to help me know when a deal is good also.  But I know there are too many variables to have a set formula.  But still hoping someone has it.

    0Reply
  • Rongsu Qi
    Rental Property Investor · Orlando, FL · Member since 2017 · 34 posts · 8 votes
    7y
    Originally posted by @Tony H.:

    @Rongsu Qi In the stock market you don't have evictions, unexpected repairs, unexpected bills, sleepless nights, ruined plans, etc.  Like others have said, ultimately it is up to you for what you are looking for.  If you are happy with the numbers then go for it.  Personally, I am following this thread because I am looking for that magical formula to help me know when a deal is good also.  But I know there are too many variables to have a set formula.  But still hoping someone has it.

    That's why we budget for maintenance and Capex reserves, as well as property management fee, right? If we don't budget for those, a 8-10% deal becomes 15-20% deal. In addition, the stock market has plenty of unexpected downturns and sleepless nights as a result too.

    I'm following this thread and commenting because personally, I've invested in the stock market for quite a few years before finding RE. Part of the reason is that any cash flow is nearly impossible in the Bay Area, and I wasn't going to invest purely based on appreciation/speculation alone, like everyone else around me is doing. I thought I've found a far better investment in RE, but got really confused seeing people in this thread say they would rather go back to the stock market. 

    I don't think there's a magic formula for a good deal, you have to work with the market and just compare to what else you have available. Am I happy with what I'm getting? Well I definitely want higher returns, but this is the best we can do in terms of any type of investment at the moment, so we did. I would've done BRRRR or look for below market deals if I invested locally.

    So what I want to say to @David Waddleton is, we don't live in 2012 anymore, so look at what you're getting in comparison to what you have available to invest in, be it the stock market or other rental properties. Just calculate the ROI in terms of cash down and time involved and compare. Personally I think we're coming to a bear market in the stock market and can't expect as good returns as we did in the past ten years. I see more stability in RE and of course other benefits like loan pay down and rent raise etc. I wouldn't put my money in the stock money if I can find a 8% deal after budgeting for maintenance, Capex and management fees. It's fine if you want higher cash on cash returns, you may just need to move to another market if possible, or be a lot more aggressive looking for under market deals.

    0Reply
  • Anthony Tritt
    Rental Property Investor · Columbus, OH · Member since 2019 · 2 posts · 0 votes
    7y

    @David Waddleton Columbus oh?

    0Reply
  • Quito Keutla
    Real Estate Agent · Renton, WA · Member since 2017 · 204 posts · 151 votes
    7y

    @David Waddleton Congrats for taking action and doing your homework. The only way to learn is to jump in. Unlike you when I bought my first property it was pure speculation and I was clueless. Happy Investing!!

    0Reply
  • Alicia M.
    Specialist · Midwest Market · Member since 2016 · 21 posts · 6 votes
    7y

    I wouldn't do it, its tight and doesn't leave any room for miscellaneous, there are plenty of good deals out there and if you are a U.S. Citizen your financing should be better terms than 25% down. Keep looking. this isn't a home run type of deal in my opinion. Also, don't be in a hurry, there is great competition but make sure your numbers are working for you. Remember this is JUST Brick & Mortar, when I invest I don't put any emotions in it. If someone "beats" me on a deal its fine as long as I stay true to my formula :) best regards

    0Reply
  • Keeton Byerly
    Rental Property Investor · Springfield, OH · Member since 2017 · 6 posts · 5 votes
    7y
    Originally posted by @Hai Loc:

    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..

     
    I about a duplex in 43211 for 30k about 2 years ago. Rents 1,200 a month.

    0Reply
  • Joshua Lidberg
    Rental Property Investor · Philadelphia, PA · Member since 2016 · 41 posts · 14 votes
    7y

    The returns you are projecting to make, are achievable in your home state. Most certainly you wont find anything like that in LA, especially for such low cost of entry, but such returns exist in California. For a first deal, I would think that it would be much better to own property as close to yourself as possible; this way even if you choose not to self-manage, you will be able to deal with contractors, realtors, PM and everyone else face to face. It's much easier (and less expensive) to learn the game when you are on site, which you will be able to replicate out of state later on. 

    0Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 957 votes
    7y

    @David Waddleton I understand wanting to get in the game, and the metric you seem to be focusing on is $100 per door, which works great when you have lots of doors.

    BUT, 1 month of vacancy crushes the entire year. You lose 1 month rent and then have to pay the PM one month when he leases it. That’s more than half your annual projected cash flow from one vacancy. Just my rationale on the deal.

    1Reply
  • Kirk Koskiniemi
    Contractor · Toledo, WA · Member since 2013 · 26 posts · 9 votes
    7y

    As a contractor, I am very familiar with what maintenance costs. Unless this is a home in immaculate condition, there is going to be work to be done. Painting, roofing, siding, water heaters, plumbing, tenants trashing.... Maybe not this year or next, but when you have tight cashflow, and you have to spend $5k on something (which isn't a large amount), it can eat your profits for several years. 

    0Reply
  • Cody Gebhart
    Rental Property Investor · Marion, IL · Member since 2016 · 3 posts · 2 votes
    7y

    Sounds alot like my 1st duplex. I was very excited to get started and there wasn't many on the market. Rents were 565. I paid 85,000. My other numbers (taxes, ins, etc) were in line with yours. I sold it 2 years later for 88,000 minus realtor fees.

    While I don't regret buying this property because it got me started. I would not purchase this property again. It didn't really make any money after expenses. Not enough to be worth any trouble.

    Good for you getting started. I would have not been confident to pull the trigger on my next purchase of a 6 plex without that duplex. So use this as a learning experience to manage tenants.

    Also I would not raise the rent on the other tenant until you get the other unit filled.

    1Reply
  • Virginia Jones
    Rental Property Investor · Pulaski, VA · Member since 2016 · 70 posts · 31 votes
    7y

    Is there a reason the insurance is so high? I'm only paying $35/month on my duplex. 

    0Reply
  • Carey Greiner
    Real Estate Broker · Bend, OR · Member since 2017 · 46 posts · 20 votes
    7y

    @David Waddleton

    How much are you setting aside for capital expenditures, ie: new water heater, repairs, roof, pavement concrete. Over the years, depending on your hold time, you’ll have to account for these items. The amount depends on age and condition of the property.

    0Reply
  • Carey Greiner
    Real Estate Broker · Bend, OR · Member since 2017 · 46 posts · 20 votes
    7y

    @Marc Winter

    I’m in Marc’s ‘corner’ on this one.

    There seems to be lots of folks offering turn key rental property in the Midwest.

    I am a novice investor and finding a few lucrative deals from distressed sellers. In Oregon this strategy is the only one that gets 15% - 44% returns on the deals and give the $100+/door we are looking for. If I buy from a wholesaler or listing Realtor, there isn’t enough ‘cream’ to protect me from the potential for surprise expenses, maybe even from mistakes I could make as a novice.

    0Reply
  • 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
  • Laura C.
    Fontana, CA · Member since 2017 · 88 posts · 36 votes
    7y

    @Tom Shallcross

    I saw your earlier post on this forum where you suggested Dave put his 25k toward private lending if his deal is producing 8-10% . . . How would one go about privately lending in that amount? Are you talking about lending to individual investors, or could it be through an investor fund, where private lenders pool their money for that kind of return? 

    Thanks for your time, 

    1Reply
  • Zachary Sexton
    Sandy, UT · Member since 2011 · 64 posts · 10 votes
    7y

    @Amit P. What did you put down?

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

    @Laura C. - I was referring to individual investors, but there are definitely funds out there and different syndication options as well.  I have experience on both the lender and borrower side of individual investments but have not raised funds for a multi-family syndication (but there are plenty of good options out there).  Feel free to DM if you want to chat on it.   

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

    @David Waddleton Congrats for taking action and doing your homework. The only way to learn is to jump in. Unlike you when I bought my first property it was pure speculation and I was clueless. Happy Investing!!

     Thank you! Jumping in I agree I just want some padding when reality happens!

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

    @Marc Winter

    I’m in Marc’s ‘corner’ on this one.

    There seems to be lots of folks offering turn key rental property in the Midwest.

    I am a novice investor and finding a few lucrative deals from distressed sellers. In Oregon this strategy is the only one that gets 15% - 44% returns on the deals and give the $100+/door we are looking for. If I buy from a wholesaler or listing Realtor, there isn’t enough ‘cream’ to protect me from the potential for surprise expenses, maybe even from mistakes I could make as a novice. 

    Seems like it is really about finding that gem deal you can find that is deeply discounted - distress or rehab etc. Gotta just keep hunting! Yes the same with me I need that padding to protect me from surprises!

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

    As a contractor, I am very familiar with what maintenance costs. Unless this is a home in immaculate condition, there is going to be work to be done. Painting, roofing, siding, water heaters, plumbing, tenants trashing.... Maybe not this year or next, but when you have tight cashflow, and you have to spend $5k on something (which isn't a large amount), it can eat your profits for several years. 

    thank you Kirk!

    0Reply
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