Investing in Duplex that needs roof and siding repairs

2 Replies

Hello BP Members!

I'm trying to analyze a deal on a duplex 3/2 unit and 2/2 unit. The home was built in 1974 and needs some exterior work (not the kind that adds value to renting). It looks like it needs a new roof or significant roof repair as well as wood siding repair. What's the best way to estimate the cost? We are house hacking, so our return won't come from our renters alone, we will be fronting the cash. 

The list price is $215k and rents in the area range from $900-$1300 I crunched the numbers and was thinking of presenting two different offers. One at full list with the roof repairs completed, and the other for 20k less and I would take care of the repairs myself. 

Any thoughts? Have I analyzed this the wrong way?

Asking Price 215000
Primary Inputs
Purchase Price($) $ 190,000.00
Downpayment(%) 3.5%
Units(#) 2
Monthly Rent($) $ 1,150
Occupancy Rate 75%
30 Year Loan Rate(%) 4.50%
15 Year Loan Rate(%) 3.90%
Secondary Inputs
Closing Costs(%) 6.0%
Property Tax(%) 1.8%
Insurance(%) 0.8%
Maintenance(%) 10.0%
Property Management(%) 10.0%
Improvements($) $ 20,000.00
Closing Costs($) $ 11,400.00
Inspections/Misc($) $ 600.00 
Value (30-Year Mortgage Scenario)
Monthly Rent $ 1,725
Annual Rent $ 20,700.00
Value Per 2% Rule $ 86,250
Value Difference (2% Rule) $ (103,750)
Annual NOI $ 13,800
ROI (Pre-Tax) 8.36%
ROI (Post-Tax) 8.1%
CAP Rate (50% Rule) 7.3%
CAP Rate (Assumed Expenses) 6.0%
Annual Expenses
Annual Property Taxes $ 3,420
Annual Maintenance $ 2,070
Annual Insurance $ 1,520
Property Upkeep/Other $ 200
Property Management $ 2,070
Total: $ 9,280 
30-Year Mortgage Results
Money Down $ 38,650.00
Monthly Gross Rent $ 1,725.00
Monthly Loan Pmnt $ 929.01
Effective Rental Income $ 20,700.00
Annual Loan Pmnts $ 11,148.09
Annual Expenses $ 9,280.00
Total Expenses + Loans $ 20,428.09
Annual Cash-Flow (Pre-Tax) $ 271.91
Annual Return (Cash-Flow + Equity, Pre-Tax) $ 3,229.76
Annual Post-Tax Cash-Flow (Pre-Tax) $ 190.34 

@Spencer Wagner   don't over complicate it.

 Once it under contract and you are doing Due Diligence get quotes for the repairs and work you need to do. 

The home inspection will come with some other small things that need to be looked at.

Check all the water heating and HVAC, and water pressure in the building.

see if you can locate the pressure regulator if you cant it could cost you $350 to find each and replace it.