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 @Alicia M.:

    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

     I am US Citizen but for investment property I have not heard any loan officer say anything less than 25% down. I'd love to hear how you are getting less than 25%?

    0Reply
  • Josue Vargas
    Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes
    7y

    @David W.

    Not sure if anyone has addressed this, but seems that you have only 5% for each of the CapEx, maintenance, and vacancy.

    If the property can rent relatively fast, and is in OK condition, I think you can survive with the 5% reserves for each.  Now CapEX at 5% could be a problem, be careful estimating the condition of the roof, HVAC, waterheater, plumbing, etc.  

    0Reply
  • Zk Lani
    Rental Property Investor · Columbia, SC · Member since 2018 · 54 posts · 12 votes
    7y

    @David Waddleton $200/month of cash flow is honestly not a bad return for first time investor. If you’re financially comfortable with it then go for it. You’ll learn a lot down the road. You’ll still benefit from tax/business deductions/depreciation/building equity every year and if you’re planning on holding it for the long run then it may be worth it. Also if it’s in a decent area (not a war zone), good tenants, etc.. then go for it.

    0Reply
  • Heather Maur
    Pickerington, OH · Member since 2017 · 2 posts · 1 vote
    7y

    I manage an apartment community in Columbus.  The rates are all over the place but At my property in the past 4 years have increased rents $200-$400 a unit (164 units) and renewed people with $40+ year after year and stayed around 70% renewal rate.  People in columbus are expecting the higher rents.  Because everywhere they look the price is going up.  I would think a duplex would appeal to more people then an apartment and would expect the cost to be higher for the added privacy.  If you finish the deal I would try renting at $800 a month.  I have someone renting a unit for $1075  the same unit last year was rented at $775.  Its definitely do able if you market the property well.

    1Reply
  • Alicia M.
    Specialist · Midwest Market · Member since 2016 · 21 posts · 6 votes
    7y

    @David W., well a duplex is still considered residential even though its a investment property. I invest heavily in the Midwestern markets especially in Ohio, we've been averaging a closing per month at 75-85%ltv. We also purchase multifamily property 2-50units. One thing I found difficult in the beginning was finding a good lender for Ohio, because not many lenders will fund there. Inbox me I will be happy to give you a couple of broker referrals. Disclaimer: Maybe its also the number of deals you've done that makes the LTV higher? I've been a full-time investor for over 24yr and I have many deals under my belt. But it doesn't help to give these folks a call to see what their criteria is to get higher LTV :) Best regards

    1Reply
  • Scott R.
    Investor · Beverly Hills, CA · Member since 2017 · 95 posts · 58 votes
    7y

    @Jared Smith

    Better market based off of what? A declining population in Cleveland probably doesn't make it a better market than Columbus. However, curious on why you think it's better.

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

    @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.

     Yah I missed the mark on this one. I have to find a property with more of a discount or better margins. Just numbers!

    1Reply
  • Daniel Rivera
    Somerset, NJ · Member since 2016 · 33 posts · 13 votes
    7y
    Originally posted by @David W.:
    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.

    Agree wholeheartedly! No idea how people scale to that many units, but I guess thats normal when you're just starting out. And yes, you can either reply by hitting 'quote' or you can just say @Daniel Rivera. Best of luck! Let us know how things turn out!

    0Reply
  • Matt P.
    Investor · Columbus, OH · Member since 2015 · 625 posts · 601 votes
    7y

    @Hai Loc Good catch. I meant 650 per side and it's still not a good deal IMO.

    0Reply
  • Hai Loc
    Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
    7y
    Originally posted by @William C.:

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

     Only mobile home park owners can take advantage of a situation like that..   I am sure D areas you can get it but collecting rent consistently is questionable including other variables  lol...

    0Reply
  • David W.
    OP
    Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
    7y

    @ Daniel Rivera thanks. I don't see your name turn into a blue link so not sure if you'll get this lol

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

    @David Waddleton $200/month of cash flow is honestly not a bad return for first time investor. If you’re financially comfortable with it then go for it. You’ll learn a lot down the road. You’ll still benefit from tax/business deductions/depreciation/building equity every year and if you’re planning on holding it for the long run then it may be worth it. Also if it’s in a decent area (not a war zone), good tenants, etc.. then go for it.

    Thanks Zk. I ended up backing out as 10% approx ROI wasn't good enough to weather any x factors especially since I will be an out of state investor. If I lived in the city I would have closed it as I could manage it which would increase my ROI. Thanks!

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

    @David W.

    Not sure if anyone has addressed this, but seems that you have only 5% for each of the CapEx, maintenance, and vacancy.

    If the property can rent relatively fast, and is in OK condition, I think you can survive with the 5% reserves for each.  Now CapEX at 5% could be a problem, be careful estimating the condition of the roof, HVAC, waterheater, plumbing, etc.  

     Agreed. In the future I will put 10% for capex!

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

    @David Waddleton Columbus oh?

     Yes sir!

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

    @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.

    I got it and it was $700 responsible for all utilites. I terminated as I felt that the ROI was too low.

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

    @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.

     How in the world are you getting 25% return?!

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

    @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.

     Thanks. Sounds like a great idea but how would you get / find someone to be interested in something like that? Maybe this is something for someone who has had a few deals under their belt? 

    0Reply
  • Jared Smith
    Real Estate Broker · Scottsdale AZ & Cleveland, OH · Member since 2019 · 168 posts · 109 votes
    7y
    Originally posted by @Scott R.:

    @Jared Smith

    Better market based off of what? A declining population in Cleveland probably doesn't make it a better market than Columbus. However, curious on why you think it's better.

     Hyper local knowledge is key. It is easy to be a professional investor and go off of the usual suspects for picking a market to invest in. Since, I am from Cleveland, OH - I know the pockets that are safe, gentrified and prospering.  Also my resources and network will allow me to move faster and smarter.  Although population is one aspect, I would respectfully disagree based on the fact that everyone has a different real estate strategy, set of skills, knowledge, and risk tolerance. In regards to access to Lake Erie, Rock n Roll HOF, Cedar Point, professional sports teams, education and economy - the rust belt is here to stay and I will believe in CLE 'till I die! 

    1Reply
  • Scott R.
    Investor · Beverly Hills, CA · Member since 2017 · 95 posts · 58 votes
    7y

    @Jared Smith

    So why would you recommend Cleveland and Mesa over Columbus? I notice you also service those two areas.

    0Reply
  • Jared Smith
    Real Estate Broker · Scottsdale AZ & Cleveland, OH · Member since 2019 · 168 posts · 109 votes
    7y

    In Cleveland I cash flow +2% of my purchase price on my properties for the last 7 yrs. and Mesa is the 36th largest city in the US with population +500k. Also in Mesa last year, I have experienced 105K appreciation from 3 SFR's.

    0Reply
  • Wesley WhiteheadPro Member
    Rental Property Investor · Depends on where my employer sends me · Member since 2018 · 171 posts · 142 votes
    7y

    Don't be too hard on yourself, David.  You learned a valuable lesson and one step closer to financial freedom.

    0Reply
  • Account Closed
    Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
    7y

    @David W.

    High expenses on that property! Are there any landlord paid utilities, like sewer/water/garbage? 


    Be careful with a property like this. A return that low on a smaller property doesn't give you enough cash flow to buffer even the smallest of surprises. At a 7% return I'd go throw my money in a vanguard index fund- same return, less passive.

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

    @David W.

    High expenses on that property! Are there any landlord paid utilities, like sewer/water/garbage? 


    Be careful with a property like this. A return that low on a smaller property doesn't give you enough cash flow to buffer even the smallest of surprises. At a 7% return I'd go throw my money in a vanguard index fund- same return, less passive.

     I ended up terminating the offer. So back to the search!

    0Reply
  • Account Closed
    Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
    7y

    Good call! I'd seek a minimum return of 15%, or at least a property that can very easily get to that number or higher.

    0Reply
  • Mica Moore
    San Antonio. Tx · Member since 2018 · 75 posts · 47 votes
    7y

    Before you rent increase the existing tenant (your only bread & butter to date) - take into consideration how long they have been there, how the keep the property & what their general reputation they have (this may be harder to figure, but you need to dig), and what the rental climate is like (tight hard to find places, or lots of inventory).  You want to avoid the tenant running away at the rent increase (unless they weren't worth having and you can get a new tenant in there quick).

    If they move, you will not only have the absence of their monthly cash, you will probably have to spend some time & money rehab the unit to make it rent ready.

    0Reply
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