2 unit what do you think of numbers?

[Ron S.]

Hello Im considering buying a 2 unit home it is a 2 bedroom full basement and seperate in law quarters above 2 car garage in a good area and both units are in awesome shape. Newer kitchens and baths and flooring. Rehab would be very minor maybe 2k total. back unit is a 1 bedroom and includes the garage both units have own electric and gas meters. home was purchased in 2007 by current owner for 148k and brought up to city code! I can get home for 76k approved short sale. The rent on main home would go for 800 and back apartment 500 for a total monthly rent of 1300. Taxes and insurance would run 3800 annually and 20% down would leave me with a mortgage of 328 for 30yr fixed and 452 for 15yr fixed. so total monthly profit after mortgage taxes insurance would be 656 for 30 yr and 532 with 15yr. Can you please let me know what you think of this deal?? thanks....

[Mark Updegraff]

Can you raise the rents at all?

I would quickly analyze as follows:

Yearly rent roll: 1300 * 12 = 15,600
minus 10% vacancy (-1,560)
minus 10% repair (-1,560)
minus 5% capital improvements (-780)
minus 10% Prop man (-1,560)
Gross Rents = 15,600 * .65 = $10,140

(-3936) financing
(-3800) taxes and insurance

Cash Flow = 2,404 / year
Initial Investment = 15,200 (20% down) + 2,000 (rehab) = 17,200 (You should add your closing costs / lender fees / title insurance / etc here)
Cash on Cash return = 14% (Cash Flow = %Cash on Cash * Initial Investment)

This does not include principal pay down, which you could add to the income side.

Sounds good to me, especially if the area is nice. The fact that it sold for so much in 2007 is good too. Hopefully it will get back to that level in the next decade or so :D

Mark