reasonable deal?

4 Replies

I am looking for a little guidance. I am looking at a duplex that is currently rented out.  $900 per side. Built in 2006 in an up and coming area. The owner is asking $210,000. If I could get in around $200,000 I can expect around 1200.00 per month in operating costs. Leaving $350 per door. Sound like too much? I own two single family homes right now but am in the market for a duplex.  What do you think?  Thanks! 

@Daniel Dawson  I'd pass on it. If you secure the property for 200k and pull in $900 per side their isn't enough cash flow. I know its a new building but after you factor in taxes, insurance, management, repairs, accounting/legal, electric  gas, water, trash services the cash flow isn't enough to make it worth it. 

I can tell you from experience,  its best to overcompensate for these things. Its always nice to make more money then expected then the other way around. 

I would run the buy and hold calculator and you will see,

@Rob Landry Thanks Rob, I appreciate the advice. Maybe I will try to get a couple more single families under my belt first. At what point would something like this sound interesting? Gas, water, electric and trash are paid through the tenants. I will also be managing this property myself. 

@Daniel Dawson  I ran it through my spreadsheet quick and it does not seem like a good deal to me. Are you buying all cash? or getting a Mortgage? I can email you the spreadsheet if you want I can't figure out how to attach it.

@Daniel Dawson That's a good question. Everyone has their own investment criteria but to give you an idea I started out with metrics of $100 dollars a door from cash flow before taxes and a ROI without appreciation of 16% or higher. I've upped that in 2014 to $150 per door and 20% ROI. I'm planning for 2015 now but I will probably increase that again, it gives me motivation to continuously try to find ways to improve the profitability of our investments.