Would you purchase this duplex?

Question

View report

Good Morning BP community,

I am trying to analyze a duplex that is right by my house to see if it is worth buying. I have attached the BP rental calculator report to this post. I will be self managing the property but i included the 10% management fee just incase i ever decide to let a property manager take over. Median rent in the area for a 3/2 is $1400. i set my numbers at $1200 mainly because i wasnt sure if duplexes rent for less than a stand alone house. This will be my first multifamily to submit an offer on so any help would be appreciated.

Their asking price is at $330K. i offered $230K and they counter offered at $285K bottom dollar. im thinking i can still get them to come down though.

heres the important details:

285K purchase price

- $235 cash flow

- 3.69% CoC ROI

- Purchase Cap 5.23%

250K purchase price

- $357 cash flow

- 6.35% CoC ROI

- Purchase cap 5.95%

Kamil Baldyga · Answer

Hey Sam! So it's difficult for anyone to say if an investment is a "good" deal or not because "good" means different things to different people. For example, I like to use the performance metric of ROI and I think 3.69% is pretty weak. At the same time though, you're getting $235 cash flow and you would own your first multifamily, which is awesome. Properties also typically perform better as time goes on. It is a long term investment after all. My advice would be to verify the rental rates and to define what your "good" deal is. I know this is an answer without actually giving an answer but I hope it helps. Let me know if you have any questions!

Dustin Somers · Answer

@Sam Collins

First of all ignore frank he clearly is on his high horse and only has knowledge of his market which is very different than yours and likely will never see the appreciation that your Texas market has and will likely continue to see. This is supposed to be a positive helpful platform

Now on to your property. It is very similar in size and style to my properties however your numbers don’t cash flow as well.  This is likely caused in majority to the high tax rate present in Texas also and you may be over estimating a few of your expenses.  (It’s not a bad thing to be conservative but you can conservative your way out of a decent property if your not careful). The cash flow you have come up with is low and would be an elimination for me unless there was some serious discounting and appreciation projected.

Would i buy it. ?  Not likely, but its Possible if the price was right and there was serious appreciation on the horizon.

Lucia Rushton · Answer

@Frank Rodrigues these properties you are comparing were bought in 2021? Just want to make sure they are as close to apples to apples for this new investor.

Sam Collins · Answer

@Lucia Rushton

I am not sure where he is getting that market from. I know here in Houston to hit those double numbers on CoC % you have to buy in the BADDDDD areas. im sure Dallas is most likely the same way. If you get inside the Loop here in Houston a little pier and beam home thats completely trashed will still run you in the mid 200's

Sam Collins · Answer

@Jim Spatzenfeld this property is in a great location. Duplex is in 100% move in ready condition and recently remodeled. Has never been used as a rental before. owner built this property so that his mother can live on one side and her care giver live on the other. after she passed away the home has sat vacant for a year and a half other than when the remodel was conducted

Sam Collins · Answer

@Jim Spatzenfeld this property is in a great location. Duplex is in 100% move in ready condition and recently remodeled. Has never been used as a rental before. owner built this property so that his mother can live on one side and her care giver live on the other. after she passed away the home has sat vacant for a year and a half other than when the remodel was conducted

Jim Spatzenfeld · Answer

If this property is in an area where you need a bulletproof vest and a machine gun to collect your rent, I would not buy it.

Frank Rodrigues · Answer

NO! Those numbers look terrible to me and when I look at the inventory I have. I don't have a single duplex that doesn't yield double digits in cap rate and COC returns. IMO, walk away. If you have questions about getting better numbers feel free to PM me. Best of luck to you and I hope that helps!

Sam Collins · Answer

@Kamil Baldyga

I had my agent pull rental comps for the area. There is only 1 duplex in my area other than this one and it is a 2/1 and rents at $1,050 a month. All the SFH 3/2.5 in my area range anywhere from $1,200-1,700 all similar in detail inside. This will be a long term buy and hold property for me. The area is also growing rapidly.

Would you purchase this duplex?

Most Popular Reply