THIS OLD DUPLEX -Analysis Help !

2 Replies

Greetings from Minne-SO-Tah! My husband and I are wondering if we should hold or sell our rental property. Looking for some other opinions. 

Purchased in 2015, lived in half of the duplex and rented out the other half with intentions to rent both sides once we moved 2 hours closer to the cities.. accomplished this November 2016. We Currently have a PM that is doing an OK job (we are probably over skeptical of his ability to manage, however, the home has been maintained OK, and we go up and do some general maintenance/checking about 2-3 times a year for some comfort of mind.. he is paid at 7% of rent).

Purchase Price- 160,000 for Side by Side Duplex in B-/C class neighborhood built in 1950

Total Invested Cash- $11,000

Gross Monthly Rents- $2,000

Monthly Cash Flow- $355

CapEx- 20% due to being built in 1950

Repairs 10%

Vacancy 5% (very low vacancy rates at this time)

NOI after all expenses including our mortgage +PM + increase in taxes due to non-homestead comes to - $12,350

Cash on Cash- 40%

Cap rate- 7.25%

Within 5 years- we anticipate needing some big expense items (Roof, replace main from home to city sewer, at least one furnace, possibly an AC and we may need to have concrete steps -up to four steps total- either demo'd and rebuilt/raised due to settling towards home and water seems to like to penetrate concrete block walls in basements. No big problem at this time, but anticipate potential). These could really add up! The value of the property per the tax statement went up $12,000 in one year.. wondering if we should just sell or learn about 1031 exchanges closer to our primary home (we also like to be a bit more hands on- we are fairly handy)! We did buy with an FHA 3.125% APR loan and only 3% down loan, so the cash on cash is really good for now. This duplex is in a small town about 2 hours away from the twin cities, and population is only around 15,000.. Too Risky? Looking for thoughts on this :) Thank you!

Agreed, selling looks like the best option with all those capex items coming up soon.  Those are all very expensive items and none are really going to add value or allow you to increase rent, just drain your cash.

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