I am a newbie to the investing game and I am looking to purchase my first investment property. The property is a multi unit 4 bed 2 bathroom that cost a total of $67,500. Both units currently rent at $550 so the total rent collected per month is $1100. I anticipate there will be some needed repairs like new siding, new appliances, and the general appearance around and in the property. The property is 11% below the zip code home value so I anticipate if I put some work into the property the value will shoot up.
On paper everything looks good, however its been sitting for 150+ days on the market. Is this a warning sign to stay away? The deal seems to good to be true.
Too little information to know for sure as it can be a wide variety of things. Could be that they haven't gotten a full price offer and seller won't budge, might be a large repair you haven't noticed, could also just be you're underestimating the repair amount mixed with ARV. If the spread isn't there then investors aren't going to want it and I'm assuming it's too ugly for a retail buyer.
Did you run comps on the property? and if so, what value did you get? $67,500 seems a bit on the higher end for toledo.
Also, I would never rely on zip code values as that encompasses a lot of different types of properties and doesn't give an accurate depiction of value.
Lastly, 11% isn't a lot of spread at all even if it is accurate, that's $7500. Just new appliances alone can run you half of that and you still have to do siding and fix the outside as you mentioned.
Value is 64k. I am assuming its a larger repair I haven't noticed. The zipcode its in (43612) has duplex's that run between 80k - 100k. I have not seen the property in person just online. I will go see it in a week or two.
I’m pretty sure that house has flaking asbestos siding. But I’m not an expert.
Generally if it’s overpriced and sits a long time that is expected, but if its cheap and sits a long time, than yes that is a red flag. Doesn’t mean you can’t make the deal work but you just have to run your numbers carefully to factor in repairing deferred maintenance.
Listings can get stinky if they sit too long. We had a couple duplex that sat ridiculously long while other worse properties sold the day they were listed. It is like the longer they sat, the worse they got. I told my wife they were a deal, but she insisted they had to be bad because they were on the market so long. It can be illogical, but sometimes days on market is the problem. That is why it is important to price a property to sell. Sometimes reaching for an extra $5K or $10K can cause a property to sit. Then even if you drop the price later, it has that old listing stink on it. Sometimes it is good to unlist it for a month and come back on fresh. That is how those duplex in my city finally sold.
Without looking at the property and location, we are all just guessing. Maybe there is a meth house next door with four pit bull outside and an Indian burial mound underneath.
@Walter Bounds great advice here already, the other thing to look at is if the tenants are actually paying rent. Just because the listing or the agent says they rent is $550 doesn’t mean that is what the tenant is paying - if they are paying anything at all. Ask for bank statements showing the deposits.