Should I do this deal?

Question

Right now I'm going through the 1031 exchange process and I'm having a tough time finding a replacement property within the 45 days. I'm an out-of-state investor from NY so I rely on friends and realtors to bring me deals.

Recently, a guy I know said he was moving and selling his duplex for $200k in Houston, Texas. I don't own any properties in Texas but after looking at the details I'm seriously considering giving it a go.

Asking price is $200k but I offered $185k cash. Each unit rents for $1,000/month and while the home is a bit older (built in 1983) it's in a B-Grade suburban neighborhood with high demand. It's questionable how much more rent I can get with light upgrades for the area but I'd be aiming for $200 more per month on an $8k budget per unit.

Expenses include property tax is $380/month. Insurance $140/month. 10% of rent to a property manager.

Account Closed · Answer

@Ayo O. Thanks for your input. I was going to go cash to get the deal and refinance afterward.

Kaelyn Motzel · Answer

Account Closed Sounds decent depending on the area and the current upgrades

Marcus Auerbach · Answer

Account Closed the deal looks promising. Make sure you check for deferrend capex, like old roof, mechnaicals, flooring etc

The most important asset for you is a good PM. A bad PM can ruin every deal and a good PM can make a bad deal workable. So if you have a good PM in another city, stay there and don't scatter all over the map!

Basit Siddiqi · Answer

Account Closed$200,000 for a duplex in a B grade neighborhood sounds promising.

Ayo O. · Answer

Based on the numbers you provided and assuming a purchase price of $200,000,this deal PASSED the 1% Rule.Assuming you are getting a mortgage( I know you are considering cash) of $150,000 on a $200,000 purchase with interest rate at 4.5%,annual taxes at $4560 and insurance at $1680 .Your PITI(monthly mortgage) will be around $1280.With a monthly rent income of $2000,you will have a gross income of $720.This is before reserves for CAPEX ,maintenance etc I think you should cashflow $500/month.

If I was in your shoes,I will go for it